Tax Court echoes the Frank Silver and Irving Cohn 1922 opus (but they were concerned with bananas) in a rash of designated hitters and one plain-vanilla order.

First up, with a solid half-dozen designated hitters, all involving la famille Zerjav, and all being dealt with by Special Trial Judge Lewis (“His Name Is His Fame”) R. Carluzzo. They involve the Section 6707A penalty for failing to report reportable transactions, with a special extra hit for not reporting a listed transaction.

Tax Court has no jurisdiction over those. Congress has left review to the US District Courts (even the Court of Federal Claims can’t go there). See Smith v. Com’r, 133 T. C. 18, filed 12/21/09.

On to the next case. Section 7428 Tax Court reviews of Section 501(c)(3) tax exemption disallowances do not permit Tax Court to enjoin IRS from yanking the exemption while the review is ongoing. Special Trial Judge John F. Dean refuses to enjoin IRS from yanking the exemption, and trumpeting same to all and sundry, in Consumer Education Services, Inc., Docket No. 6281-13X, filed 7/19/13.

Apparently IRS audited the educated consumers, yanked their 501(c)(3) letter retroactive to Day One, and then, when the consumers went to Appeals, confirmed the yank, but then rescinded the yank.

Consumers wanted the retroactive yank and its attendant publicity enjoined.

Now notwithstanding Tax Court’s limited general jurisdiction, and complete lack of equitable jurisdiction to give injunctive relief far and wide, there are exceptions, and STJ Dean lists them all. But Section 7428 isn’t one of them.

Even so, Consumers’ attorneys come up with a Taishoff “good try”. They agree that Tax Court’s jurisdiction in a Section 7428 is limited to declaring whether an entity does or does not qualify for Section 501(c)(3), as a special exception to the Declaratory Judgment Act, and they also agree the Anti-Injunction Act, Section 7421, bars enjoining collection of any tax.

“Petitioner argues, however, that notwithstanding the Declaratory Judgment Act’s general prohibition on declaratory judgments in tax cases, section 7428 actions are excepted from the prohibition. Petitioner posits the proposition that the Declaratory Judgment act is ‘coextensive and coterminous’ with the Anti-injunction Act. Because the two acts are coextensive and coterminous, according to petitioner, ‘an action allowed under one will not preclude relief afforded by the other’ and, therefore, the Court may, despite the prohibition of the Anti-injunction act, enjoin respondent’s actions pursuant to 5 U.S.C. sections 701 – 706 (2012), the Administrative Procedure Act (APA).” Order, at p. 4. (footnote and citations omitted).

Nice, but even if Consumers’ lawyers have it right, Tax Court’s jurisdiction is limited, its injunctive powers are confined to the specific instances that Congress has expressly granted, so no injunction from Tax Court.

Yes, we have no jurisdiction.

Announcing that it has found and implemented certain unspecified “cost cutting” measures, IRS has withdrawn its notice of furlough for July 22 (Monday), although certain local offices may nevertheless be closed.

Check your local listings.

Hamlet, Act I, Scene V

Judge Gustafson takes on the role of Hamlet’s Ghost in the latest iteration of Swanson-Flosystems Co., Docket No. 27975-11, and orders IRS to “swear”, in a designated hitter filed 7/18/13.

See my blogpost “Adelbert, Thou Should’st Be Living At This Hour”, 4/5/13. Swanflo’s original counsel, overmatched, begged Judge Buch for time to go to the bullpen for relief, and Judge Buch took pity.

As he and I said at the time: ‘(T)he hiring of additional counsel, however, provides some assurance to the Court that, if a continuance were to be granted, this case would be adequately prepared.’ Order, p. 2, footnote 2.

“Hope springs eternal, eh Judge?”

Having done his best, Judge Buch bailed out of the case in May, and in from the bullpen comes the ever-obliging Judge David Gustafson.

As we hoped, Swanflo’s new counsel are on the ball. IRS signs off on its responses to Swanflo’s interrogatories thus: “11. Pursuant to T.C. Rule 71 all of the above answers are made in good faith and are as complete as possible after a reasonable inquiry of the readily obtainable information.

“Paragraph 11 is followed by a conventional signature block. Respondent asserts that the interrogatory responses ‘are signed in conformance with T.C. Rules 71(a) and (c)’.” Order, p. 1.

Nope, says Judge Gustafson, that’s not sworn, as Rule 71 requires answers under oath, nor is it an unsworn declaration made under penalty of perjury (see 28 USC sec. 1746). The emphasis is by Judge Gustafson.

So weasel-wording doesn’t get it, IRS. As the Ghost said, “Swear!”

Look at the sad story of Amin Juma Abd, as told by Judge Kerrigan in a designated hitter, Docket No. 9592-12. Ami is late with his petition. No biggie, that’s gotten battalions of petitioners tossed before now.

But Ami’s case is unusual. As Ami puts it “Petitioner wants to bring to this honorable court attention, that he is detained by the Homeland Security at this time, awaiting the determination of his removal. Petitioner, humbly request from this court, to put aside this case until petitioner be released so he can litigate his case with full accesses of his file and discovery from Respondent.” Order, p. 1.

Too bad, Ami, IRS mailed your SNOD to your last-known address, Fort Dix, New Jersey, a location where I once was an overnight guest, but, unlike you, I was promptly released the next day.

Ami claims he was ordered by a US District Court to attend an Inmate Skills Development Plan in Chicago, and thus was away when the SNOD arrived at Fort Dix.

Too bad, says Judge Kerrigan, you should have told IRS where you were.

Unanswered in all this is Ami’s claim that as he’s been in detention since 2006 and the SNOD covers 2008, he can’t have taxable income.

So Judge Kerrigan falls back on the “we are a Court of limited jurisdiction” patter.

Ami, you’re out.

Today’s story is from the courtroom of the obliging Judge David Gustafson, who has a designated hitter for us in the case of Gregory Scott Savoy, Docket No. 12316-12L, filed 7/16/13.

No one disputes “(1) that Mr. Savoy, who has suffered from a long-term illness, may not have been given an adequate opportunity to challenge his 2007 liability, (2) that Mr. Savoy may not have been given adequate time, in view of his illness, to submit tax returns for 2003 to 2010 (the submission of which was a prerequisite to his eligibility for certain collection alternatives), and (3) that there may also be a defect of ‘verification’ under section 6330(c)(1), involving the notice of deficiency underlying the 2007 liability.” Order, at pp. 1-2.

So IRS asks Judge Gustafson to send Greg back to Appeals, so he can get a fair shake all around on the numerous defects from his prior visit to Appeals. And Judge Gustafson did.

Is Greg happy? No. He wants Judge Gustafson to certify, per Section 7482(a)(2)(A), whether the Americans With Disabilities Act (the ADA) applies to IRS, so he can take an interlocutory appeal.

You’ll remember that taxpayers’ batting averages with interlocutory appeals are hardly what will qualify one for the All-Star Game. See my blogpost “Too Late And Not Timely”, 4/25/13. And Greg fares no better than Carol Diane Gray did back in April.

For an interlocutory appeal (an appeal from an order that does not finally determine the case or controversy; that’s an order where neither side has won or lost–yet), you need two things: first, a controlling question of law is involved where there is a substantial ground for a difference of opinion, and second, that the appeal may materially advance the termination of the litigation.

Well, by its terms the ADA doesn’t apply to the Federal government, leaving aside Jimmy Madison’s famous comment from The Federalist No. 57: “I will add, as a fifth circumstance in the situation of the House of Representatives, restraining them from oppressive measures, that they can make no law which will not have its full operation on themselves and their friends, as well as on the great mass of the society. This has always been deemed one of the strongest bonds by which human policy can connect the rulers and the people together. It creates between them that communion of interests and sympathy of sentiments, of which few governments have furnished examples; but without which every government degenerates into tyranny. If it be asked, what is to restrain the House of Representatives from making legal discriminations in favor of themselves and a particular class of the society? I answer: the genius of the whole system; the nature of just and constitutional laws; and above all, the vigilant and manly spirit which actuates the people of America—a spirit which nourishes freedom, and in return is nourished by it.”

But this is a non-political blog, right?

However, the Rehabilitation Act of 1973, which does apply to the Federal government, has the standards of the ADA engrafted thereon. “In sum, the ADA does not apply to Federal agencies; but the Rehabilitation Act of 1973, employing the ADA’s definition of ‘disability’, does apply to the Federal agencies. If this is Mr. Savoy’s position, then he is correct. If he disputes this proposition, there is no substantial ground for difference of opinion.” Order, at p. 4.

So Greg, what’s the difference of opinion? ADA standards apply.

IRS will put Greg in CNC (currently not collectible status) and review his case. “It is therefore not clear whether there will actually be any dispute that would implicating [sic] the provisions of the Rehabilitation Act (or, if it were applicable, the ADA). We therefore cannot say that an immediate appeal of any legal question about the applicability of the ADA would ‘materially advance the ultimate termination of this litigation’, for purposes of section 7482(a)(2)(A). “ Order, at pp. 4-5.

So Greg loses, and goes back to Appeals.

And doesn’t anybody proofread these orders?

As we reach the midsummer All-Star break, I am reminded of an axiom every batter learns in his or her earliest hour: make the pitcher throw pitches. If she or he throws enough of them, one of them will be the pitch you want.

The corollary extends to Tax Court, as Judge Chiechi teaches in John D. Nye and Rose M. Nye, 2013 T. C. Memo. 166, filed 7/15/13.

Raise every issue you possibly can in your petition, and argue it in your brief, even if your case is as thin as a spider’s web (just don’t be frivolous). Make IRS, and Tax Court, deal with every issue. Make ‘em throw pitches.

The case itself is another of the alimony night-of-the-living-dead cases. John settles with ex-spouse Alice for a $350K lump-sum payout, but the question is what would happen if Alice dies after the revised judgment of divorce is entered in FL county court, but before the payout actually happens?

It’s the old Section 71(b)(1)(D) problem, and Judge Chiechi grants IRS summary judgment.

I’m finding fault with the Court’s rationale, as it’s based upon an intermediate FL appellate court case. Judge Chiechi relied on dictum, as the court in that case didn’t need to reach the conclusion that the obligation to pay survived, in denying the deceased spouse’s executor’s petition to modify that divorce decree. In fact Judge Chiechi admits that the intermediate appellate court said several times it wasn’t going there. See 2013 T. C. Memo. 166, at p. 17, footnote 15.

So Judge Chiechi falls back on general contract law statements. But as we learned in James F. Moore, 2011 T. C. Memo. 200, filed 8/16/11, “(I)f State law is ambiguous in this regard, however, a ‘federal court will not engage in complex, subjective inquiries under state law; rather, the court will read the divorce instrument and make its own determination based on the language of the document.’ Hoover v. Commissioner, 102 F.3d 842, 846 (6th Cir. 1996), affg. T.C. Memo. 1995-183.” 2011 T. C. Memo. 200, at p. 6. And see my blogpost “Essmiss Essmoore, Essmiss Essmoore,” 8/16/11.

I submit State law was ambiguous on the specific point, the State’s highest court not having ruled on the point.

Howbeit, that’s for John and his lawyer to sort out, if they appeal.

What I want to stress, though, is that John’s lawyer never contested the Section 6662 accuracy penalty, even though Judge Chiechi asked for supplements to the parties’ papers. “In fact, petitioners alleged in the petition that ‘[t]he only issue is the deductibility of the $350,000 as alimony.’” 2013 T. C. Memo. 266, at p. 8, footnote 6.

So when she ruled against John on the deduction, the penalty was automatically included. See my blogpost “An Interest(ing) Question – or Two”, 6/11/13, wherein I said “And their lawyers should write on the blackboard 100 times: I will raise every error I can possibly conceive of in every petition I file.”

In fact, in James F. Moore, which I cited supra, as the high priced lawyers say, IRS conceded the penalty. But James’ lawyer obviously contested the penalty. Here, John’s lawyer (who also represented him in the divorce) didn’t.

As I’ve suggested in the analogical child-support Section 152 situation, some lawyer will get in trouble if his/her client doesn’t get what they expected. See my blogpost “Moody Blues”, 9/19/12.

It’s a game that two can play. First, Notice 2013-43, published 7/12/13, delays implementation of FATCA withholding for six months, so as to permit FFIs, PFFIs and QIs to get their acts together, and IRS to get the website up and running. Here’s the link.

And now for a really cool taxpayer tactic. You really wouldn’t notice it if you didn’t read between the lines of a couple of recent Tax Court orders.

I call it the “Lost in the Woods” variant on delay of the game. First up, Mordechai Yosef & Esther Gottfried, Docket No. 21322-12S, filed 7/10/13. Looks like a run-of-the-mill motion to dismiss for want of prosecution, and motion by petitioners to vacate denied. Petitioners never claim they didn’t get the notice of trial or the pretrial order, or give any adequate reason why they were no-shows. Dismissal stands.

Simple, right? Except Mordy and Esther live in Israel; and they requested trial in Aberdeen, South Dakota. Now a quick search on the internet finds that only airline that flies between Israel and Aberdeen, SD, lists the cheapest round-trip flight from Israel to Aberdeen, SD, at twice the cost of a flight from Israel to New York City. So why Aberdeen, SD?

Might be a one-off, maybe.

Or maybe not. See Ayala Misheli & Udi Jarlip, Docket No. 17656-12S, filed 7/12/13. Ayala & Udi coincidentally live in Israel, and promised to send settlement documents to IRS, but requested more time because of the difficulty of intercontinental transmission.

Time granted, but then the lines of communication went dead, and no further words or papers from Ayala & Udi.

Judge Goeke gives Ayala & Udi one last chance, but then will grant a motion by IRS to dismiss for want of prosecution.

Oh, I almost forgot. Place of trial is Billings, Montana. A quick internet search shows tickets just as expensive as Aberdeen, SD, and a 22 hour travel time.

Lost in the woods? Or delay of the game? In both cases petitioners were pro se, but someone was thinking.

Maybe Tax Court needs a rule that those seeking to lay venue need to show some nexus to the desired place of trial.

 My long-suffering readers may remember my essays on the shrink-wrapped guru; see my blogposts “Real Estate Professional Revisited”, 3/24/11, “Basis for Dummies”, 11/24/11, and “The Shrink-Wrapped Guru”, 9/4/12.

Well, here’s the sad story of a guru who failed, incidentally giving the disciple a Section 6673 hit, John B. Rice, Docket No. 21676-12L, an Order in place of any T.C. or T. C. Memo., as none were issued today, and the one Sum. Op. was another alimony case with nothing new in it.

John’s story is quickly told, and STJ Armen, The Judge With a Heart, tells it.

Back on June 12, STJ Armen hit John with summary judgment in favor of IRS and a Section 6673 frivolity delay-of the-game penalty, after reviewing what John put in, and failed to put in, to oppose IRS’ motion for summary judgment.

John being nowise deterred, “…the Court received from petitioner a document entitled “Rebutal [sic] And Motion For Respondent’s Motion For Summary Judgement [sic] And To Impose A Penalty Under I.R.S. Sec. 6673 Not To Be Granted And That All Issures [sic] By Respondent Be Rejected By The Court, And That A Summary Adjudication Be Ruled In Favor Of The Petitioner”, which document has been filed (as of the date of its receipt) as petitioner’s Motion To Vacate Order And Decision Entered June 12, 2013.” Order, at p. 1.

John claims he’s sick, cognitively impaired and lacks good recall capabilities. Aside from having raised these before in a 2010 proceeding where Judge Wherry blew them off, John produces no medical evidence of the foregoing. And he is a perennial litigant in Tax Court, who has raised the usual spurious arguments before now, and lost, and been warned about Section 6673.

Now for the basis of the title of this little essay. “Also in his motion to vacate, petitioner invokes ‘my mentor’, Robert Clarkson. However, in matters touching on Federal taxation, Mr. Clarkson may not be a worthy mentor. See http://e.wikipedia.or/wiki/Robert _Clarkson”. Order, at p. 2.

Old Clarkie was a staunch tax protester, disbarred in South Carolina, jailed more than once and enjoined several times from promoting phony tax evasion schemes, before he died in 2010.

John, better trust the shrink-wrapped guru.

And Play the Game

Those of us who have a sentimental turn of mind (even though we can laugh at sentiment) remember, and grin, at Sir Henry Bolton’s famous line (which I for one had misattributed to Kipling for years): “Play up, play up and play the game”.

Well, every working day there appear on the Tax Court docket dozens of unsigned petitions with unpaid filing fees, which, though timely filed, are jurisdictionally defective. And Ch J Colvin issues bushelbasketsful of orders chucking these into Outer Darkness, usually after giving the petitioners a second, and sometimes even a third, chance, to send in the $60 (or an Application for Waiver of Filing Fee) and sign the petition.

Well, there’s some good news even for the dilatory whose petitions wound up in Milton’s “Stygian caves forlorn”. It’s James Edward Orr, Docket No. 29053-12S, filed 7/10/13, with Ch J Colvin telling the story.

Jimbo filed a petition timely, and apparently even signed it, but didn’t pay. Almost three months later, Jimbo filed an amended petition, again apparently signed but again without the $60 or an Application for Waiver.

Ch J Colvin twice ordered Jimbo to pay up or apply, but he didn’t. Finally, Ch J Colvin tossed Jimbo’s petition and amended petition for want of jurisdiction.

But Jimbo rallied, like the young man in Sir Henry’s ballad. Almost two months after his petition, as amended, was booted, he came up with the $60, and so Ch J Colvin vacates and sets aside his earlier order of dismissal.

Practitioners, if a client wanders in with a home-made petition and an order of dismissal for want of paying the $60, remind the client to “pay up, pay up, and play the game”.

The 1931 Florence Reece coalminers’ song is sung on two successive days by Tax Court, and only one side comes up with the right answer.

Both times it’s a Section 6015 innocent spouser, and the interrogated party is the attorney for both spouses.

First up is Ovadia Meron & Galit Meron, Docket No. 9172-11, filed 7/8/13. Galit claims she got no benefit from whatever Ovadia’s delictions might have been, but IRS claims she never prosecuted her claim to innocent spousehood.

The ever-obliging Judge Gustafson gives Galit a couple of weeks to come up with a reason why her claim shouldn’t be dismissed for want of prosecution, but throws in an admonition to her counsel: “Petitioners’ response shall also show why petitioners’ counsel does not have a conflict of interest when representing both spouses in this case.” Order, p. 1.

In short, bail, baby, bail.

Next up, doing the right thing, is the attorney for the former spouse of Cindy Palmieri, Docket No. 26110-10, filed 7/9/13. Judge Gale gets this one.

“…petitioner’s counsel, Mr X, filed a Motion to Withdraw as Counsel (Motion), citing a conflict of interest in representing petitioner with respect to any claim for section 6015 relief in this case while simultaneously representing petitioner’s former spouse, Michael Palmieri, in Docket No. 26796-10. The Motion further states that petitioner does not object and that respondent’s position was unknown.” Order, p. 1. (Name omitted).

Judge Gale lets Mr. X out, being satisfied that withdrawal is appropriate.

Takeaway- See Circular 230, Section 10.29. See also Rule 1.7 of the ABA Model Rules of Professional Conduct, which applies to Tax Court practitioners (see Tax Court Rule 201(a)).