Maybe so, but that doesn’t let you contest your underlying tax liability in a CDP, if you got a SNOD and didn’t timely petition. Even Paul Simon’s 1975 hit avails you not, as we learn in Judge Lewis (the Right Way) Carluzzo’s designated hitter, Sarunas Vincas Abraitis, Docket No. 4985-12L, filed 4/1/13.

SVA petitions from a NOD at Appeals, contesting his underlying liability on the ground that his mental condition precluded him from petitioning when he got the SNOD, and opposing IRS’ summary judgment motion because the administrative record doesn’t include all the documents SVA submitted.

Judge Lew agrees about the record, so no summary judgment for IRS, but SVA can’t challenge the underlying tax liability, whatever his mental state was when he got the SNOD.

Judge Lew: “We agree with respondent [IRS] that petitioner is not entitled to challenge the existence or the amounts of the underlying liabilities in this proceeding. Petitioner’s position on the point is unsupported in fact and in law. Information showing petitioner suffers certain health issues hardly establishes that he suffers from any mental disease or defect, and as noted in U.S. v. Davis, __ F. Supp. 2d __, 2013 WL 796655, at *2 (D. Or. March 4, 2013) neither do the frivolous positions he advanced in correspondence with respondent that preceded this action. Furthermore, even if he did so suffer, petitioner has provided no authority, and we have found none, that suggests that an individual who did not petition this Court in response to a notice of deficiency because of some mental disease or defect could later challenge the income tax liability that results from the assessment of that deficiency in a section 6330(d) proceeding.” Order, p. 2 (Footnote omitted.).

And here’s the omitted footnote: “In any event, petitioner’s claim with respect to his lack of capacity to have petitioned the Court in response to the deficiency notices would appear to be undermined by his unchallenged, and so far presumed capacity to have authorized the commencement of this proceeding. See Rule 60.” Order, p. 2, footnote 2.

The relevant portion of Rule 60 is found in Rule 60(d): “Where a party attempts to represent himself or herself and, in the opinion of the Court there is a serious question as to such party’s competence to do so, the Court, if it deems justice so requires, may continue the case until appropriate steps have been taken to obtain an adjudication of the question by a court having jurisdiction to do so, or may take such other action as it deems proper.”

Apparently SVA wasn’t still crazy after all these years.

No, not the European colonies in China in the last century, but the story of Barbara Jane Knudsen, Petitioner, and Kurt H. Knudsen, Intervenor, 2013 T. C. Memo. 87, filed 4/1/13, and no, it’s not an April Fool’s Day joke either.

BJ and ex-spouse Kurt Hans (an attorney, natch) ran up $155K in tax delinquencies over a four-year stretch, but Kurt Hans gets a bankruptcy discharge, and, though offered a chance to participate, bows out. BJ of course wants Section 6015 equity, but is stymied by the old two-year rule (cf. Lantz, 132 T.C. 131 (2009), rev’d, 607 F.3d 479 (7th Cir. 2010), and its progeny, wherein Tax Court shot down IRS’ two-year rule for Section 6015(f) equitable relief in 1.6015-5(b)(1) and three separate Circuit Courts of Appeals shot down Tax Court. Thereupon, IRS decided to reconsider the two-year rule via Chief Counsel Notice CC-2009-012 (Apr. 17, 2009), amplified and clarified by Chief Counsel Notice CC-2010-005 (Mar. 12, 2010).

But while IRS was amplifying, clarifying and reconsidering,  BJ offered IRS $200, $50 for each of the four years at issue, and claimed it was a qualifying offer for Section 7430 purposes. BJ had meanwhile run up $50K in legal fees, claimed she had no money, and Jan Pierce, Esq., her redoubtable barrister, needed the cash.

On the eve of trial, and notwithstanding IRS was three-for-three in the CCAs, “…IRS announced as a policy directive that the Department of the Treasury would expand the two-year deadline ‘in the interest of tax administration and * * * not reflective of any doubt concerning the authority of the Service to impose the two-year deadline’ and that the two-year deadline would no longer be enforced in cases docketed in this Court. Chief Counsel Notice CC-2011-017 (July 25, 2011); see also Notice 2011-70, 2011-32 I.R.B. 135.” 2013 T. C. Memo. 87, at p. 5.

When IRS folded and gave BJ equitable innocent spouse relief, meaning BJ paid zero, Jan played the Section 7430 card.

Judge Thornton trumps BJ’s ace. Although IRS yelps that Jan’s fees are unreasonable, Judge Thornton doesn’t go there, holding that BJ didn’t prevail (and where have we heard that song before?).

Judge Thornton: “Section 7430 generally provides that a taxpayer may qualify as a prevailing party only if either (1) the taxpayer has made a qualified offer in certain circumstances (qualified offer rule) or (2) the Commissioner’s position is not substantially justified. See sec. 7430(c)(4); see also Haas & Assocs. Accountancy Corp. v. Commissioner, 117 T.C. 48, 59 (2001) (stating that the qualified offer rule may apply even where the Commissioner’s position was substantially justified), aff’d, 55 Fed. Appx. 476 (9th Cir. 2003). Petitioner relies exclusively upon the qualified offer rule, which is implicated where ‘the liability of the taxpayer pursuant to the judgment in the proceeding (determined without regard to interest) is equal to or less than the liability of the taxpayer which would have been so determined if the United States had accepted a qualified offer of the party’. Sec. 7430(c)(4)(E)(i). The qualified offer rule may not apply, however, where the ‘judgment [is] issued pursuant to a settlement’. Sec.7430(c)(4)(E)(ii)(I).” 2013 T. C. Memo. 87, at pp. 9-10 (Footnote omitted, but read it. Jan never argues whether IRS was substantially justified, and rightly so, as IRS had won the pick-three in the CCAs; but the $200 offer was a nice move, and merits a Taishoff “good try” for clever Jan).

Alas for Jan and BJ, Judge Thornton declines to consider whether the $200 offer was  bona fide, and dumps Jan’s argument that the parties never agreed to a written setttlement, because BJ offered to pay $200 and the IRS refused that and gave BJ a free pass.

Ya gotta like Jan; moves like that should have gotten the dude something, ya think?

But Judge Thornton says “…respondent [IRS] did not ultimately concede that he was wrong on the merits given the facts or law that existed when he first took a position in the case. Respondent’s concession that petitioner was entitled to her requested relief resulted from an administratively promulgated policy directive to cease enforcing the two-year deadline in the interests of tax administration. Respondent conceded this case shortly after that policy change.” 2013 T. C. Memo., at p. 12. (Footnote omitted.)

IRS had won all along the line to date, had no fear of an adverse result upon appeal, decided to give the late-filing spouses a break, and so IRS was substantially justified and then some.

And stipulations needn’t be written: the parties’ actions speak louder than words. And the aim of Section 7430 is to make parties settle pre-trial. BJ got everything she wanted–innocent spouse relief.

No payday for Jan. Too bad.

Runs Hard Aground

A reprise, but not our friend Erik McBride Thompson, the Truker who found Tax Court habit-forming (see my blogpost of that name, 12/20/11), but rather Joe Insinga, who recently graced my blogposts “Did Nothing”, 3/13/13, and “Perpetual Discovery”, 3/23/13, and who comes back yet again before The Obliging Judge, David Gustafson, in yet another designated hitter, Docket No. 004609-12W, filed 3/29/13.

Joe is at it again; dropping his Rule 81 motion to depose Robert B. Gardner, outgoing Whistleblower Program Operations Manager, as Judge Gustafson suggested he do back on March 23, Joe couples his motion for leave to withdraw same with a motion to request production of documents.

This is a triple-barrel no-no. First, Rule 54(b) requires motions be separately stated. Unlike most courts where, in my experience, omnibus motions, or motions seeking alternative forms of relief, are generally made to speed things up, in Tax Court it’s “one size fits one”.

Second, Tax Court discovery is informal, repeat, informal. See Branerton v. Com’r, 61 T. C. 691 (1974), one of the most, if not actually the-most, cited cases in Tax Court lore. Before anything, you have to play show-and-tell. Motions are only acceptable where “play nice” has failed.

Judge Gustafson: “Petitioner’s motions make no allegation of any prior attempt at informal consultation but rather appear to indicate that the motions are Petitioner’s initial attempts. The Court instructs respondent to treat petitioner’s application filed March 18, 2013, and petitioner’s motion for leave filed March 25, 2013, as informal requests for information and to respond with reasonable promptness. Treated as informal requests, these documents may be an adequate informal predicate for later formal document requests or interrogatories. But until the informal process has been attempted, we cannot tell whether any formal discovery must be attempted or compelled. (Petitioner should also note that Rule 74(c) requires first the service (not the filing) of a notice and an objection, and only then the filing of a motion for an order compelling the deposition.).” Order, pp. 1-2.

Third, a deposition of a non-party witness, like WPOM Bob G., is, as Rule 74(c)(1)(B) instructs us,  “an extraordinary method of discovery and may be used only where . . . a nonparty witness . . . can give testimony . . . which [is] discoverable within the meaning of Rule 70(b) and where such testimony . . . cannot be obtained through informal consultation or communication (Rule 70(a)(1)), [or through] interrogatories (Rule 71) ….” Cited in Order, at p. 2.

So since WPOM Bob G is still at IRS, and as Judge Gustafson says he told the parties in a phonecon on March 25, IRS will consider letting Joe’s counsel talk informally with WPOM Bob G, let’s see what happens. But even if IRS tells WPOM Bob G to clam up, there are still interrogatories; if IRS remains callous and obdurate, there are Rule 104(c) sanctions. And Judge Gustafson’s pretrial memo requires the parties to state what witnesses they propose to call and a detailed summary of such witness’ testimony on jurisdictional issues. Absent good cause, an unidentified witness will be barred.

So, that’s Tax Court discovery. It’s more like a New York State special proceeding, where most forms of discovery, absent special circumstances, are not allowed. And counsel unused to Tax Court rules, and who moreover appear not to have taken the trouble to read them and the cases construing them, will run swiftly hard aground. And perhaps they will encounter a judge less obliging than Judge Gustafson to kedge them off.

That is not going to discuss the IRS “Star Trek” video.

No, not the 2007 Celine Dion album, but rather a lesson to Stanley Cohen, in 2013 T. C. Memo. 86, filed 3/28/12, taught by Judge Halpern.

Stanley was an investor (or maybe an investment; see 2013 T. C. Memo. 86, at p. 7) in a deal called Park Leasing Assoc., P’ship, whose career came to an end in 2006. But Park Leasing’s story goes back to the 1980s, so Stanley owes about $75K in tax, and a whopping $598K in accumulated interest. See my blogpost “Bang – A Warning to Tax Matters Partners (and their advisors)”, 1/5/11.

Stanley claimed the other investors got a better deal than he was offered. He raised that at an equivalent hearing (not a CDP for the tax levy he got, because Stanley sent in his request too late), and his attorney presented evidence of disparate treatment, but Appeals didn’t buy it.

Stanley tried a petition to Tax Court, but that got dismissed for want of jurisdiction.

Now someone at IRS decided to hand Stanley a NFTL, as apparently the levy didn’t get the appropriate quantities of Stanley’s hide. Stanley files the 12153, asks for a CDP and reiterates the “unequal treatment” argument.

The SO says no, you had a chance to contest the underlying liability. Stanley says, “no, I was contesting that you denied my settlement offer, which was to settle on the same terms as the other investors.”

Judge Halpern: “[SO]’s conclusion that petitioner was attempting to raise a challenge to the amount of his underlying tax liability is understandable since, on the lien hearing request form, petitioner did not identify an offer-in-compromise or other collection alternative as his reason for disagreeing with the lien notice. He claimed only that he had not been treated the same as other partners who were offered settlements. How [SO] pigeonholed the claim, however, is unimportant. To the extent petitioner was raising a liability challenge, [SO] was correct in concluding that section 6330(c)(2)(B) precluded him from doing so, since he had the opportunity to dispute his liability in response to the levy notice. To the extent he was asking to settle his liability or to compromise the interest assessments, those were the identical issues petitioner had raised during the levy hearing, and the question is one of whether sections 6320(c) and 6330(c)(4) precluded him from again raising them during the lien hearing.” 2013 T. C. Memo. 86, at pp. 13-14.

And Judge Halpern’s answer to question no. 2 hereinabove is yes, it does.

Judge Halpern: “We have held, however, that an equivalent hearing is ‘indisputably an ‘administrative * * * proceeding’ within the meaning of section 6330(c)(4)’ (and, by inference, section 301.6320-1(e)(1), Proced. & Admin. Regs.). See West v. Commissioner, T.C. Memo. 2010-250, 2010 WL 4780323, at *4. Thus, the levy hearing was at least an administrative proceeding within the meaning of section 301.6320-1(e)(1), Proced. & Admin. Regs., and there is no doubt that petitioner claimed at the levy hearing that he had not been treated the same as other partners who were offered settlements.” 2013 T. C. Memo. 86, at pp. 13-14.

And Stanley and his attorney fully aired Stanley’s objections and introduced evidence. They materially participated, and having taken their chance, are precluded from  raising that issue again.

Donald B. Meinhardt and Arvilla Meinhardt occasionally stayed at their Minnesota farmhouse, and let family and friends stay in the place rent-free (or maybe in exchange for services like repairs, but never reported income nor kept records). But they did rent out the 140 acres of farmland for cash, and tried to deduct the farmhouse expenses.

This incurred the ire of IRS, and Judge Kerrigan has no sympathy for Don and Arvy in 2013 T. C. Memo. 85, filed 3/27/13.

Section 280(A) avails them not. Judge Kerrigan: “Although neither petitioners nor respondent discussed sec. 280A, we note that no deduction is allowed with respect to the use of a dwelling unit which is used by the taxpayer during the taxable year as a residence.  See sec. 280A. A taxpayer is treated as using a dwelling unit as a residence if he used the unit for personal purposes for a certain number of days. Sec. 280A(d)(1). A taxpayer is deemed to have used a dwelling for personal purposes for any day the unit is used by a member of the taxpayer’s family, sec. 280A(d)(2)(A), unless the unit is rented at a fair rental for use as a principal residence. Because the evidence in this case did not establish whether anyone lived in the farmhouse during the years in issue, and because we resolve this case on other issues, we do not resolve the issue of the potential applicability of sec. 280A.” 2013 T. C. Memo. 85, at pp. 7-8, footnote 2.

And of course Don and Arvy have zero records. So we get  INDOPCO and Cohan and New Colonial Ice Co. and, as Bob Fosse would put it,  all that jazz.

The rental of the land is separate from the farmhouse, as Don and Arvy did no farming, so Don and Arvy had to use Schedule E, supplemental income and expense and not Schedule F, farming. Maybe some farming work might have saved Don and Arvy, but the passive loss rules would have rendered same problematic.

However, the forms used to report this sad tale weren’t chosen by Don and Arvy, but apparently by local attorney and tax guru Mr. Tenney, about more of whom see infra, as the high-priced lawyers say.

In any event, Don and Arvy could show no affirmative act whereby they discontinued personal use (including family use) and devoted to farmhouse to use in a trade or business, or for production of income. Judge Kerrigan: “…even if the taxpayer never used the property as a residence there still must be some affirmative act appropriating the property for the production of income.” 2013 T. C. Memo. 85, at p. 10 (Citation omitted).

So game over on the deductions, and we go to the penalty shot. IRS has Don and Arvy looking at the 20% Little Chop, accuracy.

Enter local attorney and tax guru aforesaid: “Petitioners recognized their unfamiliarity with tax law and approached Mr. Tenney, a practicing attorney during the years in issue, to assist in preparing their Forms 1040. Petitioners testified that Mr. Tenney ‘did a high volume of tax returns for the whole community’. Petitioners also testified that Mr. Tenney  ‘asked questions about the farm’. Petitioners gave him ‘all of [the] materials that * * * [they] thought were relevant to * * * [their] taxes’. We conclude that petitioners in good faith took reasonable efforts to assess their proper tax liabilities by seeking advice from a qualified tax return preparer and reasonably relied on Mr. Tenney’s expertise. See Furnish v. Commissioner, T.C. Memo. 2001-286; sec. 1.6664-4(b)(1), Income Tax Regs. Accordingly, petitioners are not liable for the section 6662(a) accuracy-related penalties.” 2013 T. C. Memo. 85, at pp. 16-17.

Wanna bet the returns the aforesaid guru does will get extra helpings of IRS scrutiny?

And speaking of high-priced lawyers, did you see the Victor-DLA Piper story? I don’t know the rights and wrongs, and I won’t hang anybody on the strength of a news article, but e-mails are the plaintiffs’ best friend, and lawyers especially should know this (and that they are discoverable).

This is not a proposition that gets you very far in a CDP, as two designated hitters demonstrate today, 3/26/13, while Tax Court is on break from opinions.

The cases are Shari L. Hart, Docket No. 019120-12 L, filed 3/26/13, and Charles Lavel Stringer, Docket No. 016282-12 L, same date. The Judge With A Heart, Special Trial Judge Armen, drew Shari, and Judge Thornton has Charles Lavel.

For STJ Armen, see my blogpost “Ignorance is Bliss?”, 11/10/11.

Shari was working at Miller & Midyett Realtors, Inc., a Kansas real estate firm. For convenience, she claims, she signed commission checks to salespeople. Larry Midyett and two other people were the honchos of the place, and Larry even gave Shari a written statement that she wasn’t a responsible person. From that, you can see that this is a TFRP case, and though the real estate peddlers weren’t common-law employees, Section 3121 makes them so for FICA-FUTA purposes.

Shari never raises this when she gets the Letter 1153, telling her IRS is going to nail her for the unpaid trust funds. Instead, she sues Larry and gets a default judgment (what does that tell you about Larry’s solvency?). So she asks for a CDP, at which time she asks the SO to wait until she collects from Larry. But it’s a year since she got the judgment, and so far Shari hasn’t gotten the proverbial centavo uno out of ol’ Larry.

STJ Armen: “Petitioner has never sought a collection alternative in the form of an installment payment agreement or an offer-in-compromise. Rather, petitioner has sought forbearance by respondent in order to permit petitioner to execute on her default judgment against Mr. Midyett and presumably remit any proceeds to respondent.

“The fact that petitioner secured her judgment in May 2012 but has yet to successfully execute on it might suggest that petitioner’s ‘collection alternative’ is not particularly realistic. But, regardless, the fact remains that under applicable law petitioner remains secondarily liable for the trust fund portion of the corporate taxpayer’s employment taxes and that respondent, as creditor, is entitled to seek payment from petitioner and not wait for petitioner to secure possible payment from Mr. Midyett. After all, among the responsible officers, petitioner may be the one with the deepest pockets.” Order, p. 8.

Judge with a heart? Sure. STJ Armen offers the following consolation: “Finally, the Court notes that petitioner is not without a judicial remedy in the form of a refund action. However, such an action would lie in the appropriate United States District Court (see 28 U.S.C. sec. 1346(a)(1)) or in the United States Court of Federal Claims (see 28 U.S.C. secs. 1346(a)(1), 1491(a)(1)), but not in the Tax Court. See United States v. Clintwood Elkhorn Min. Co., 553 U.S. 1,4,11 (2008); see also Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006); McCormick v. Commissioner, 55 T.C. 138, 142 (1970). In Bland v. Commissioner, T.C. Memo. 2012-84, at n.13, the Court, citing Flora v. United States, 362 U.S. 145, 170 n.37 (1960), and Davis v. United States, 961 F.2d 867, 870 n.2 (9th Cir., 1992) described how ‘it would be relatively easy for a similarly situated taxpayer [such as petitioner] to effectively obtain a prepayment judicial review of a sec. 6672 penalty assessment in a refund suit’.” Order, p. 9.

So Shari, have another lawsuit. Or pay up. And IRS, have summary judgment against Shari. And go collect.

Charles Lavel’s tale is similar, but it involves income taxes for a year he filed but didn’t pay. He’s fighting the Texas Attorney General over child support monies. A true Texan, like some relatives of mine, Charles Lavel “…attached to the form a typed letter that stated, among other things, that ‘I believe I don’t owe the money to y’all because I filed tax returns for those years.’ Order, p. 1.

Apparently Charles Lavel was due a refund for subsequent year, but IRS sent the money to the Texas AG to pay support for Charles Lavel’s offspring, so Charles Lavel sued the Texas AG.

Charles Lavel has another argument, but it is relegated to a footnote: “In his petition petitioner asserts vaguely that his 2007 tax liability should have been reduced on account of tax deductions and credits he had in his 2008, 2009, and 2010 tax years. But contrary to Rule 331(b)(4) and (5), the petition does not contain a clear assignment of error in this regard and does not adequately state the facts on which petitioner bases any such assignment of error. In particular, even if we were to assume for the sake of argument that petitioner was entitled to claim deductions and credits for years after 2007 (an issue not properly before us in this proceeding), petitioner has not articulated, and we are not aware of, any legal basis for asserting that such alleged tax benefits for later years would affect his tax liability for 2007.” Order, p. 4, footnote 3.

Charles Lavel claims his lawsuit against the Texas AG raises a question of fact, but Judge Thornton isn’t buying. Since Charles Lavel never submitted a Form 656 or a Form 433-A, “…the existence or outcome of the alleged pending lawsuit is not germane to the determination to sustain the proposed levy.” Order, p. 5.

I do have to give Charles Lavel a Taishoff “good try”, though, for he seeks a writ of habeas corpus ad testificandum to get the SO to testify at Tax Court. IRS claims this is an improper way to get a witness to testify in Tax Court, but Judge Thornton ducks by giving IRS summary judgment.

Takeaway– Sue whom you like, but pay your taxes.

Just Not That Special

 That’s the story of the Lipsmeyers, John K., wife Melissa and brother David, and daughter Jennifer, told by Judge Cohen in K & K Veterinary Supply, Inc., 2013 T.C. Memo. 84, filed 3/25/13. K & K is a C corp.

The Lipsmeyers toiled in the family business, which K & K was, along with 85 or so employees; the family ran “…a wholesale distributor of animal health products for large animals, swine, sheep, goats, and horses; lawn and garden products; farm hardware; pet supplies; and products for farm stores and related dealers. Petitioner sold roughly 17,000 to 19,000 different products and had between 550 and 600 vendors.” 2013 T. C. Memo. 84, at p. 2.

John K. alone, as sole shareholder of K &K  decided everybody’s compensation, from the family down to the newest employee. John K. was generous; out of a gross profit of $9 million, taxable income about $100K. The expenses were the family’s salaries and rental of properties owned by John K. and brother David.

IRS claimed John K. overcompensated the family.

First comes the battle of the experts, and IRS’ expert wins because he used better data.

Judge Cohen: “Courts have considered various factors in assessing the reasonableness of compensation, such as: employee qualifications; the nature, extent, and scope of the employee’s work; the size and complexity of the business; prevailing general economic conditions; the employee’s compensation as a percentage of gross and net income; the employee shareholders’ compensation compared with distributions to shareholders; the employee-shareholders’ compensation compared with that paid to non-shareholder-employees; prevailing rates of compensation for comparable positions in comparable concerns; and comparison of compensation paid to a particular shareholder-employee in previous years where the corporation has a limited number of officers. No single factor is dispositive.” 2013 T. C. Memo. 84, at pp. 9-10. (Citations omitted).

But where the employee handing out the money is also the sole shareholder, the courts look more closely, because of the lack of bargaining.

Now John K. started the company and was essential, but not essential enough to be worth what he paid himself; and so was brother David. K & K was a big and profitable company, but it paid $30K in dividends when its gross profit was $9 million. Melissa K. was listed as vice president, secretary, and assistant chief financial officer, but she testified that “[i]t’s very hard for me to say what exactly I was doing other than the obvious, which was helping with, you know, like the financial decisions. * * * Well, just have conversations naturally with my husband about, you know, what was going on with the business as far as were there any–you know, where monies were going or anything that was upcoming as far as needs of the company, just in general finances.” 2013 T. C. Memo. 84, at pp. 13-14.

Not enough to justify an average salary of $200K per year, especially as Melissa only worked a thirty-hour week.

And the rest of the family team, though obviously competent, were just as obviously overpaid, when IRS’ expert trotted out the comparables.

So at the end of the day, notwithstanding all the factors (none of which is dispositive), the end result is that, though you supply health products for swine, you shouldn’t imitate them.

This is one for the lawyers, lest they feel neglected. The stymied wannabe whistleblower, Joseph A. Insinga, Docket No. 4609-12W, 3/21/13, for whose sad story see my blogpost “Did Nothing”, 3/13/13, is back before Judge David Gustafson again.

This time, Joe wants to take a deposition, ostensibly to “perpetuate” testimony that might otherwise be lost, per Rule 81. “However, such a deposition ‘shall be taken only where there is a substantial risk that the person ***will not be available at the trial of the case’. Rule 81(a).” Order, p. 1.

So who is the unavailable witness? It’s Whistleblower Program Office Manager Robert B. Gardner. Why is WPOM Bob G substantially at risk of being unavailable at the trial?

Judge Gustafson: “The application alleges that Mr. Gardner ‘is slated to retire from the Internal Revenue Service at the end of June, 2013, or upon some date in July, 2013’, but in so stating petitioner has made no showing of any substantial risk that Mr. Gardner will not be available for a June 2013 hearing. We will nevertheless order respondent to file a response stating whether Mr. Gardner will be available.” Order, p. 1.

Judge Gustafson notes that Joe wants Bob G to produce documents, but those are IRS’ documents, not Bob G’s personal papers. For those, Joe needs to use a Rule 72 demand for documents, after the Rule 70 show-and-tell. Judge Gustafson suggests IRS treat Joe’s present application as a document request, and informally comply.

But Judge Gustafson has a warning for Joe: “…although petitioner’s application is under Rule 81 to perpetuate testimony, the application states that ‘Petitioner will seek to elicit all of Agent Gardner’s properly discoverable knowledge’-making it appear possible that the intended purpose of the deposition is actually discovery. If upon reflection petitioner concludes that what he seeks is discovery and not perpetuation, then he should withdraw his Rule 81 application. The Court would not allow Rule 81 to be employed in such a manner as to frustrate the clear purposes of Rule 70 (requiring informal consultation before formal discovery) and Rule 74(c)(1)(B) (allowing discovery depositions without consent only in ‘extraordinary’ circumstances).” Order, p. 2.

But Judge Gustafson never stops being helpful: “On the other hand, we do not want the June 2013 hearing to be unnecessarily lengthy and inefficient. The Court will therefore invite the parties to suggest, during the upcoming telephone conference, means for assuring fair and efficient informal consultation (under Rule 70), stipulation (under Rule 91), and examination of witnesses at trial.” Order, p. 2.

You can see how Tax Court discovery differs widely from most State Court and even other Federal Court procedure, and how many attorneys came adrift when practicing in the somewhat rarefied atmosphere of 400 Second St, NW.

Nothing exciting out of Tax Court today, 3/21/13, but IRS has formally stated that those taxpayers, whose forms for the 2012 filing season were delayed due to the recent Congressional impasse, who timely pay in good faith based on best available information, will get some relief.

Filing dates cannot be extended past six months for in-country taxpayers, but they will get a bye on Section 6651(a)(2) late-payment penalty for any shortfall in what they paid if they estimated in good faith and needed to file one of the delayed forms. For further details, see Notice 2013-24, which lists the impacted forms.