Cold print, especially word-processor-generated print, cannot begin to express the depth of contempt and summary dismissal conveyed by the somewhat-arcane phrase first set forth at the head hereof (as my expensive colleagues would say). It was Grandma’s way of blowing off one who held himself (it was always “himself” in those days) out as an expert, but was in fact a poseur, a mere smatterer, unworthy of the slightest consideration.

Andrew P. Mattson & Lindsey J. Mattson, Docket No, 6501-20, filed 10/4/24, were caught up in the Pine Ridge hush-hush Aussie outback kerfuffle. For the backstory, see my blogpost “Pine Ridge – Case Closed,” 11/20/23*. Among the cases therein cited is that of Cory Smith, who appealed the toss of his case to DC Cir.

That appeal caused Judge Ronald L. (“Ingenuity”) Buch to put Andy’s & Lindsey’s motion for reconsideration on hold, pending outcome of said appeal. But Cory’s former attorney pulled out, and his successor moved to withdraw the appeal.

Judge Ingenuity Buch tells us why, and why the other outback spies-in-the-sky might wish to bail.

“Counsel confirmed that the positions argued in Smith’s briefing, which are also advanced in several cases pending before the Tax Court, were proposed to Smith by John Anthony Castro, a tax preparer recently convicted of 33 counts of federal tax fraud.” Order, at p. 1.

Looks like Mr. Castro “marketed himself to U.S. taxpayers around the world, including by ‘claiming to be an expert on certain tax issues related to Australian ex-pats,’ and advised clients to take nonexistent exclusions based on his interpretation of tax treaties between the United States and Australia).” Order, at p. 2.

Cory Smith disavows the bogus assertions he got from Mr. Castro, and says he only appealed because he promised to pay Mr. Castro half the refund he got from the US fisc if he won. Looks like Mr. Castro didn’t care much for the law or regulations.

Motion for reconsideration denied.

* https://taishofflaw.com/2023/11/20/pine-ridge-case-closed/

We’ve all been there, shivering bleary-eyed through the big test after the all-nighter. James Michael Warren, T. C. Sum. Op. 2024-20, filed 10/3/24, must know the feeling. He set up what was to be a group home. I’ll defer to Judge Adam B. (“Sport”) Landy to recount the story.

John, an engineer with Lockheed Martin, set up “an assisted living facility to provide professional caregiver services. To that end, Mr. Warren purchased a single-family home (group home),,, near his residence….” T. C. Sum. Op. 2024-20, at p. 2. John didn’t include the $6K in rent he got, but did take a $41K deduction, claiming to be a Section 469(c)(7) real estate professional.

John didn’t have contemporaneous records.

“In preparation for trial, Mr. Warren created—and presented—two time logs. The first log maintained that Mr. Warren worked 1,421 hours at the group home; it was created one week before trial. The second log maintained that Mr. Warren worked 1,628 hours at the group home; it was created the night before trial. Mr. Warren testified that the second log contained corrected information derived from emails and other records he maintained. Some of the hours listed on Mr. Warren’s logs are supported by reference to emails, work permits, and invoices, but most remained unsupported beyond Mr. Warren’s testimony.”  T. C. Sum Op. 2024-20, at pp. 2-3.

Unfortunately, “Mr. Warren does not qualify as a real estate professional under section 469(c)(7)(B) because he worked fewer hours at the group home than he did at Lockheed. Mr. Warren’s employee status at Lockheed was personal service in a trade or business. Mr. Warren worked 1,913 hours at Lockheed, and his job duties did not involve real property activities. To meet the first requirement of the section 469(c)(7)(B) test, Mr. Warren needed to spend more than 1,900 hours working at the group home. Even if we accepted Mr. Warren’s second log as accurate, the total time spent on the group home totaled only 1,628 hours.” T. C. Sum. Op. 2024-20, at p. 4.

And the $25K active participation deduction phases out south of James’ AGI, per Section 469(i)(3).

Pulling an all-nighter only works if you pass the test.

Going for the record for the shortest full-dress T. C., Judge Goeke expends but five (count ’em, five) pages on John F. Carter, 163 T. C. 6, filed 10/3/24. John blew, got denied by the Ogden Sunseteers (“no dough, you go”), and then filed Chapter. IRS filed a claim for pre=Petition taxes in the bankruptcy proceeding, but John and IRS waited some fourteen (count ’em, fourteen) months to tell Tax Court.

John’s trusty attorney wants to invoke 11 USC §362(a)(8) to stay the review of the Section 7623 shootdown. While ordinarily one would ask what John’s back taxes had to do with his blowing, John blew on the counterparty to a deal he did, claiming the counterparty misreported the deal. So he claims IRS may have setoff of the ultimate reward against John’s taxes.

Judge Goeke says he don’t need no 11 USC 362(a)(8) stay, because 11 USC 362(a)(7) takes care of it.

The 2005 amendment to 11 USC 362(a)(8) expressly limits the automatic stay to matters “concerning the tax liability of a debtor who is an individual for a taxable period ending before the date of the order for relief.” 163 T. C. 6, at p. 3. That both John’s tax liability and his blowing claim arise out of the same deal doesn’t extend the stay, even if the record supported John’s assertions, which in this case it doesn’t. Anyway, pre-amendment Tax Court opinions said the same thing as the amendment.

Of course, Tax Court has no jurisdiction under Section 7623 to determine the blower’s own tax liability.

IRS also tried to stay the blow review pending the outcome of Lissack in DC Cir, but that was denied as moot.

Still and all, I’ll award a Taishoff “Good Try, Second Class” to John’s trusty attorney, Paul Michael Spizzirri, Esq.

STJ Peter J. (“HB”) Panuthos has six decades of top-class experience as attorney and STJ. But when I find STJ Panuthos confronted by such as Tonia L. Hartman, Docket 1713-24, filed 10/2/24, I am reminded of a line from Nobel Laureate R. A. Zimmerman: “Twenty years of schoolin’ and they put you on the day shift.”

It’s another all-zeros Form 1040. I understand the frustrations and anger; the present system is deeply flawed. But the cure is not effected by making a fruitless protest that only worsens your situation by invoking Section 6673, although STJ Panuthos spares the rod this time.

So STJ Panuthos, ostensibly avoiding “somber reasoning and copious citation of precedent” does exactly that. And at close of play, “… here the record demonstrates that, whether focusing on the invalidity of petitioner’s return reflecting zero income… or the computational amount of income omitted, the statute of limitations does not bar assessment of petitioner’s [year at issue] taxes.” Order, at p. 4. (Citations omitted).

Plus five-and-ten chop, of course.

But is a law review article by a distinguished attorney going to convince such as Tonia?

Ruben T. Varela, T. C. Memo. 2024-92, filed 10/1/24, filed an all-zeros return for year at issue, and settled with IRS for no tax due and no refund due. IRS did go for a $5K Section 6702 frivolous return penalty and seeks to levy to collect. Ruben petitions, and IRS seeks a Section 6673 frivolity penalty for that.

Judge Cary Douglas Pugh decides that Ruben filed a frivolous return, even if he didn’t owe anything. He did seek a refund of his FICA withholding, to which he stipulated he wasn’t entitled. He did avoid a Section 6702 chop for another year, which IRS had tacked on.

Judge Pugh holds that even though Ruben owes nothing, his all-zeros return is frivolous. Somber reasoning and copious citation of precedent supports her view. Ruben’s 1040-EZ was all-zeros, accompanied by the usual Forms 4852 purported correcters; it purports to be a return, didn’t contain information sufficient to show how to calculate tax due; and it shows a position identified as frivolous by IRS in Notice 2010-33, 2010-17 I.R.B. at 609, 611.*

So IRS can levy for the $5K.

But the Section 6673 chop doesn’t happen.

“We have seen no other case in which petitioner was warned against pursuing these types of arguments (nor did we warn him in this case before respondent’s Motion was filed). We decline to impose a section 6673 penalty at this time. We caution petitioner that a penalty may be imposed in future cases before this Court should he continue to pursue these misguided positions.” T. C. Memo. 2024-92, at p. 7.

Taishoff says a quick docket search shows that IRS sought a Section 6673 chop against Ruben T. Varela, Docket No. 16694-18L, 7/29/19, which ex-Ch J Michael B. (“Iron Mike”) Thornton denied as moot; the order doesn’t state that Ruben was warned.

* https://www.irs.gov/pub/irs-irbs/irb10-17.pdf

Judge Joseph H. Gale retired effective 9/30/24. An appropriate announcement appeared on the Tax Court website homepage.*

I’m sure we all wish Judge Gale a happy and fruitful retirement.

* https://ustaxcourt.gov/resources/press/10012024.pdf

Seems an old-time protester/defier move is making a comeback. Joel S. Bliss & Valerie S. Bliss, Docket No. 10609-24, filed 9/30/24, are a couple weeks (hi, Judge Holmes) late with their petition from a SNOD.

When IRS moves to toss, Joel & Valerie respond with “the notice of deficiency is invalid because it violates I.R.C. section 6065, which states in relevant part: ‘Except as otherwise provided by the Secretary, any return, declaration, statement, or other document required to be made under any provision of the internal revenue laws or regulations shall contain or be verified by a written declaration that it is made under the penalties of perjury.'” Order, at pp. 2-3.

Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan rejects.

“Petitioners, however, are mistaken. Section 6065 imposes requirements on documents filed by taxpayers and does not apply to the Commissioner. See Davis v. Commissioner, 115 T.C. 35, 42 (2000)*.” Order, at p. 3.

As the old song says, “for you, not for me.”

* https://casetext.com/case/davis-v-commr-of-internal-revenue-4

It’s Friday, so enough already.  Autumn weather has already come to our Minor Outlying Island. Time for cocoa and a brief listen to Les Feuilles Mortes.

Except.

Judge Ronald L. (“Ingenuity”) Buch, grappling Laocoön-like with twenty (count ’em, twenty) consolidated microcaptives headed up by Skylab Series of Fortress Insurance, LLC, et al., Docket No. 25669-16, filed 9/27/24, gives us a primer on what are appropriate responses to notices to admit and interrogatories. The result is a split decision, but I’m not going into the minutia. Discovery geeks can read that for themselves.

My objection is that a Tax Court judge, one of 15 when there should be 19 (Section 7443(a)), has to spend time on this stuff when the USDCs and State trial courts have shunted these sideshows off to magistrates, special referees, judges’ law secretaries, and law clerks.

I just said it a week ago. See my blogpost “Referee?” 9/20/24.*

If you want to clear a docket, make it clear that gamesmanship is off the menu. Discovery disputes go to the bullpen; stipulate, don’t capitulate; the SPTO (or small-claim version thereof) is “an order, not a suggestion,” as the late Bankruptcy Judge Adlai Stevenson Hardin was wont to say. And courts are where trials take place, so be ready to go.

*https://taishofflaw.com/2024/09/20/referee/

It’s a well-worn (some readers might say worn out) jibe of mine: lawyers can’t add, and Tax Court judges won’t add. But that’s not so for Judge Elizabeth A. (“Tex”) Copeland, who was a CPA before capping off a stellar career by ascending the Tax Court Bench.

When she sends parties off to a Rule 155 beancount, she has already gotten granular with bank deposit reconstructions, depreciation schedules, and drive-by gasoline deductions.

See Ralph M. Ottuso, T. C. Memo. 2024-91, filed 9/26/24. Ralph sells stoves in Caroga, NY, which features “refreshing rippling waters and its rugged rocky terrain.”

Ralph and his neighbor had an arrangement where Ralph could fill his vehicles at the neighbor’s pump and pay as he went, running a balance. But want of specificity and recordkeeping defeat Ralph’s Section 162 deduction. Ralph can’t show the vehicles are QNUVs, per Section 274(d). The 14K GVW hurdle in Reg. Section §1.274-5(k)(2)(ii) is the problem.

Judge Tex Copeland sorts out a loan and the sales proceeds of a personal use truck, neither of which are taxable, which confused the RA who did the bank deposit reconstruction. And she sorts out and Cohanizes some depreciation deductions.

There’s a bunch concessions (hi, Judge Holmes) , so the Rule 155 beancount is necessary, but it shouldn’t take long.

The offloading of cargo from larger to smaller vessels is a necessity in some confined ports, but doesn’t work when limited liability companies or limited partnerships are drawn up alongside well-heeled elders to unload goodies in anticipation of estate taxes.

Such is the case of the well-meaning grandnephew ex’r in Estate of Anne Milner Fields, Deceased, Bryan K. Milner, Executor, T. C. Memo. 2024-90, filed 9/26/24. Who better to expatiate on a classic Texican matriarch than Judge Elizabeth A. (“Tex”) Copeland?

The late Anne was a highschool graduate secretary who married a highroller in what my native-born Texan granddaughters call “th’awl bidniz.” When her spouse died, she showed herself a true Mustang, abandoning the social whirl and going to SMU for accounting and business courses, consulting business partners, and ultimately “(H)er schooling, charisma, drive, and curiosity yielded good business decisions, which over time compounded into considerable personal wealth.” T. C. Memo. 2024-90, at p. 3.

The late Anne’s ex’r was her devoted protege, and he took care of her in her declining years, seeing off dishonest caregivers and calling the cops on scammers. He had POA, but found one of Anne’s banks didn’t like them, so he got his accountant and an attorney to set up a couple intermediaries (hi, Judge Holmes), whereon to offload $15 million of Annie’s goodies, leaving her with about $2.8 million and a hefty estate tax bill. He had to claw back money from the offloaders to pay legacies and tax.

Anne of course retained enough control to get the offloaded goodies back into her gross estate. While there was a transfer to the intermediaries, it wasn’t for reasonably equivalent value.

Judge Tax Copeland, a CPA herself before ascending the bench, sorts it out, shows IRS got their numbers wrong but lets them stand (it helps the petitioner).

No good faith reliance to defeat the chops, as what the advisers did was too good to be true.