Paul Williams’ and Roger Nichols’ 1971 hit for the Carpenters about sums up today, as we await rain and snow on this Minor Outlying Island off the Coast of North America. Judge David Gustafson must again brush off the frivolities of Jack Donald Supinger, Docket No. 4810-23, filed 2/12/24.

Jack Donald claims he’s not a citizen because DHS has no record of him, but the Fourteenth Amendment puts paid to that; his claim he’s not resident is belied by his SC address. And his claim he has no “equitable contract” with the US of A is also off target. Resident aliens are taxed here, nonresident aliens are taxed on US-sourced and effectively-connected income, and Congress has the Sixteenth Amendment, hence they don’t need no contract. So Judge Gustafson gives Jack Donald the Section 6673 frivolity yellow card at no extra charge.

Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan has to deal with a Genius Barista-generated non-sealing of a bushelbasketful of documents that should have been sealed, in Cory Lynn Rensmon, Docket No. 8871-21, filed 2/12/24. This is an example to those who want records and dockets sealed that, even when you get an order sealing the stuff, maybe it doesn’t always get sealed or stay sealed. Going to Tax Court may be dangerous to your privacy health.

Phoebe Jonas, Docket No. 575-22S, filed 2/9/24, certainly worked as a performing artist. But Phoebe applied her performing skills, not to Shakespeare, Ibsen, and Sophocles, but to the more remunerative “appearing in commercials and doing voiceover work.” Order, at p. 1.

To get work, Phoebe needed a talent agent, who in turn dealt with a payment agent. The last-named extracted Phoebe’s bucks from the ad agency or commercial production company, passed same to the talent agency, who paid the payroll taxes, took their cut, and paid Phoebe the balance, with a W-2 at no extra charge. Phoebe deducted the talent agent’s fees (she used more than one in year at issue) as an employee business expense, as it certainly was, until.

Until TCJA put Section 67(g) in the cooler.

STJ Jennifer E. (“Publius”) Siegel takes up the story. “Because of this change, petitioner sought to deduct the expenses pursuant to other statutory authority.

“Section 62(a)(2)(B) allows a deduction for ‘expenses paid or incurred by a qualified performing artist in connection with the performances by him of services in the performing arts as an employee.’ Among other things, to be considered a ‘qualified performing artist,’ a taxpayer’s gross income may not exceed $16,000. See § 62(b)(1)(C).” Order, at p. 2.

Phoebe lived in NY when she petitioned, and presumably did so during year at issue. Most commercials and the like are filmed in NYC Metro. $16K doesn’t go far there.

“Petitioner reported adjusted gross income of $135,215 in [year at issue], exceeding the income limit.” Order, at p. 2. That’s bare survival for any free-market renter on this Minor Outlying Island off the Coast of North America, who also wants to eat occasionally.

Phoebe claims the $16K cutoff is unfair, and disproportionately affects certain classes of performers. STJ Publius: “The Tax Court cannot evaluate the law’s fairness, however, and must apply it as it is written.” Order, at pp. 2-3. Pore l’il ol’ Tax Court has no equitable jurisdiction, so it is up to Congress “to address questions of fairness and to make any improvements to the law.” Order, at p. 3.

I cannot comment in a blog intended for reading round the family dinner table on the possibility of any useful action of Congress.

And it doesn’t matter that Phoebe never got her hands on the cash the agent(s) took; that’s not relevant to whether she is a qualified performing artist.

Although CSTJ Lewis (“Quel Nom!”) Carluzzo doesn’t say it in Susan D. Turner, T. C. Memo. 2024-20, filed 2/8/24, when he sends Susan and IRS off for a Rule 155 beancount, I hope Susan doesn’t get tagged with the 20% Section 6662(a) chop.

No mention of chops in this four (count ’em, four) page opinion, but Susan is back to single, not the HOH she claimed, and no EITC.

Yes, her minor grandchild did not provide more than half his/her support during year at issue, and Susan “helped [grandchild] pay for rent, phone bills, clothing, food, transportation, and other personal expenses. ” T. C. Memo. 2024-20, at p. 2.

But (you guessed it) grandchild did not live under Susan’s roof for more than half the year; Susan could only establish 60 days. Even though State court named Susan as grandchild’s guardian for years, including year at issue, that’s a nonstarter in the qualifying child stakes.

Sympathetic CSTJ Lew goes the extra: “From what has been submitted, it does not appear that petitioner is entitled to an earned income credit applicable to an eligible individual without a qualifying child, but we make no finding on the point. If the parties agree that she is, then they can reflect that allowance in their Rule 155 computations.” T. C. Memo. 2024-20, at p. 3, footnote 2.

Tate A. Hohnstein & Alexandra T. Faretra, Docket No. 3547-22S, filed 2/8/24, looks like a straight underpayment, with deficiency and 20% negligence chop thrown in at no extra charge stiped out. So why an off-the-bencher from Judge Goeke?

Alexandra was seeking divorce from Tate during year at issue, but that didn’t become final for more than a year thereafter. So Alex filed MFJ for year at issue, getting Tate’s info from him to prepare same, per deal between their respective counsel. Only for whatever reason Tate didn’t give her a W-2 showing an extra $30K of income, hence the SNOD, which they petition.

Or maybe not, since Alexandra claims she never signed the petition.

Except.

Alexandra fully participates in this case, with her own trusty attorneys, and signs the stip agreeing to the deficiency and chop. So the case is over, right?

No, because said trusty attorneys want, and get, Section 6015(b) apportioned innocent spousery.

Tate says Alexandra got the benefit of the $30K. So what? says Judge Goeke.

“…it would appear that had he submitted this W-2 to Ms. Faretra’s counsel in the divorce proceedings, he may have been subject to paying additional amounts to her in the divorce proceeding, as this amount was far in excess of his normal income in prior years.

“This failure to include the W-2 has been the subject of a stipulation and agreement by the parties and is no longer in dispute.” Transcript at p. 5.

Alexandra says she didn’t know about the $30K or the W-2 disclosing same. Judge Goeke says there’s no evidence she did know, and besides, it was in her interest to let the divorce court know, so she could get more out of Tate, as she had custody of their children.

So Judge Goeke gives Alexandra innocent spousery on the deficiency and chop. And Taishoff gives her trusty attorneys a “Good job.”

I wonder if Alexandra and trusty attorneys are now on their way back to divorce court.

A phrase uttered much more earnestly than in Tax Court litigation sums up the characterization Judge Albert G. (“Scholar Al”) Lauber places on the much-amended and retitled aggregation of documents that sum up the property settlement agreement between Joseph Anthony Martino, Jr., T. C. Memo. 2024-18, filed 2/7/24, and his loved-once Ms. Roberts.

The facts are pre-TCJA, so alimony was still deductible.

Joe wants $600K of deductions for the last two years of this saga. Judge Scholar Al plows through the history of Joe’s defaults both in the property settlement agreement and other obligations, which led to mortgage foreclosure, bankruptcy, garnishees on Joe’s disability insurance proceeds, and continual visits to GA State courts to restart and ultimately unscramble this frittata.

At close of play, what started as “a marital settlement agreement (Settlement Agreement) addressing numerous issues, including the division of marital assets, child support, and ‘taxable periodic alimony’ to be paid by petitioner to Ms. Roberts,’ and which “specified an allocation of assets that was ‘meant to be an equitable division of the marital property, except as specifically provided herein, and said division is non-taxable to either party.,’” T. C. Memo. 2024-18, at p. 2, remained so.

For once, obligation to pay after death of payee is off the table. This time, it’s parsing the divorce or separation agreement per Section 71(b)(1)(B) to make sure its definition of alimony does “not designate such payment as a payment which is not includible in gross income under this section and not allowable as a deduction under section 215.” T. C. Memo. 2024-18, at p. 8.

Judge Scholar Al, a stickler for precise phraseology, winces slightly.

“Section 71(b)(1)(B) is drafted somewhat unartfully, containing as it does a double—indeed a triple—negative. Rephrased in simpler terms, this provision requires us to determine whether the instrument ‘contains a nonalimony designation.’ This inquiry is a practical, not a technical, one. The instrument ‘need not mimic the statutory language,’ e.g., by ‘specifically refer[ring] to sections 71 and 215.’ Rather, ‘the divorce or separation instrument contains a nonalimony designation if the substance of such a designation is reflected in the instrument.’” T. C. Memo. 2024-18, at p. 8 (Citations omitted).

Everything is coming up property, not alimony, until Joe tries arguing that the two (count ’em, two) State Court Income Deduction Orders (IDOs, which I called garnishees) on Joe’s disability insurance payments somehow converted those takeouts into alimony.

Not while Judge Scholar Al is on the case.

“Petitioner appears to equate the IDOs with ‘Domestic Relations Support Orders’ under Georgia law and says that IDOs cannot be used to effect an ‘equitable division of property.’ He offers no plausible support for this: The ‘equitable division of property’ was effected by the Settlement Agreement and the Divorce Decree. The IDOs did not divide any property. Rather, they were essentially orders of garnishment, i.e., a mechanism for ensuring that petitioner made the property settlement payments that the Superior Court had separately ordered him to make.” T. C. Memo. 2024-18, at p. 9, footnote 3.

Sorry, Joe, no go. As it was in the beginning, is now, and evermore shall be. Property without end.

Applying Count Basie’s terminology to repurpose an old favorite, that’s Judge Tamara Ashford’s suggestion to Christopher Crumedy, T. C. Memo. 2024-19, if he wishes to repent of frivolity and escape the Section 6702 $5K frivolity return chop.

Chris frivoled by filing two (count ’em, two) Forms 1040 for year at issue, claiming no salaries, wages, etc. (although he did have same), claiming some withholding, and trying to turn the 1040-V payment voucher into a draft on the withholders.  T. C. Memo. 2024-19, at p. 2. This got Chris the frivolity warning and an imposition of the Section 6702 chop, which Chris petitioned.

There was a remand to consider the underlying liability, as Section 6702 are assessable, no SNOD needed. But Chris only faxed copies of some correspondence with IRS without explanation to the AO.  Chris claims these were his attempts to withdraw his allegedly frivolous returns.

So the confirmation of the NITL stands as to the underlying liability, because Chris did not meaningfully contest it.

“Petitioner seems to question only whether the IRS made a lawful assessment of the section 6702(a) penalties because in his view he was entitled to withdraw the [year at issue] returns that the IRS received… and in fact had attempted to do so. In support of his position, petitioner relies on section 6702(b)(3) and the two exhibits attached to his CDP hearing request, which were copies of the two assessment notices on which he had added a typed statement requesting withdrawal of each return the IRS had received….” T. C. 2024-19, at p. 11. (Footnote omitted, but it says Chris unsuccessfully tried the Section 6751(b) Boss Hoss gambit.)

The attempted withdrawal doesn’t work. Section 6702(b)(3) only allows withdrawal of “‘specified frivolous submissions,’ which are defined in section 6702(b)(2)(B) as CDP hearing requests and applications under section 6159 (relating to written installment payment agreements), section 7122 (relating to compromises), and section 7811 (relating to taxpayer assistance orders); and (2) section 6702(b)(3) provides a circumstance, i.e., allowing a taxpayer to withdraw his ‘specified frivolous submission,’ which results in the section 6702(b) penalty not applying with respect to that submission. The penalties against petitioner were not assessed under section 6702(b) but rather under section 6702(a) for having filed frivolous tax returns for 2017. Petitioner never made a ‘specified frivolous submission’ as that term is defined in section 6702(b)(2)(B).” T. C. Memo. 2024-19, at pp. 11-12.

If you’re going to frivol, be specific.

Justin C. Cloar, T. C. Memo. 2024-17, filed 2/6/24, asserts his RCP is minuscule because he is permanently unemployed (not having worked for the last two years and survived on borrowings “from friends and family and was performing occasional contract work for a national law firm.” T. C.  Memo 2024-17, at p. 8, footnote 5). And true, the SO on the remand probably didn’t get the IRM 5.8.5.20 calculation of future earnings right.

“However,  we find this potential error by SO R to be harmless in this case. Even if Mr. Cloar cannot secure work with the same wages as his previous employment, he could surely be re-employed at some point in the future, considering his education. Therefore, it is not unreasonable to conclude that Mr. Cloar has the potential to pay more than the nominal amount of $25 towards his total unpaid tax liabilities. In sum, we conclude that SO R acted appropriately and within her discretion in determining Mr. Cloar’s RCP.

“Our role is not to redetermine the RCP of the taxpayer and whether it is 100% accurate as determined by the COIC unit.” T. C. Memo. 2024-17, at p. 9. (Name omitted).

A source tells me Justin is a lawyer and a long-distance runner in AR. Judge Christian N. (“Speedy”) Weiler states “Mr. Cloar has unpaid individual income tax liabilities for the years at issue along with penalties and interest, totaling $107,410. Mr. Cloar filed income tax returns for the years at issue but failed to remit full payment of the tax due on the respective returns. Mr. Cloar does not contest the amounts of his underlying tax liabilities.” T. C. Memo. 2024-17, at p. 2.

Justin offers a $25 per month IA or going CNC.  Judge Speedy Weiler accepts neither.

Lonnie Wayne Hubbard, T. C. Memo. 2024-16, filed 2/6/24, certainly caused Judge Alina I. (“AIM”) Marshall to employ a lot of somber reasoning and copious citation of precedent to establish that the IRA grab resulted in constructive receipt of the proceeds to satisfy the criminal forfeiture following Lonnie’s conviction in USDCEDKY for “various crimes related to the distribution of controlled substances and listed chemicals in violation of 21 U.S.C. §§ 841(a)(1), 841(c)(2), 846, 856(a)(1), and 18 U.S.C. §§ 2 1956(h), and 1957.,”. T. C. Memo. 2024-16, at p. 2.

Lonnie was a KY pharmacist; a source tells me Lonnie was selling pseudoephedrine, which can be a cold medicine but also can be used to make methamphetamine. Speed kills. Lonnie also was divorced, his ex-wife got their house and contents and their joint bank accounts, and refused to communicate with him. Wherefore he claims he never got the 1099-R from his IRA custodian when the Feds grabbed his IRA. And he made no money while in jail.

Lonnie’s argument is he never had constructive receipt of the $400K of IRA funds.

“The funds from petitioner’s T. Rowe Price IRA were forfeited to the USA as an involuntary distribution. Though they were not under his control, petitioner constructively received the funds by having received the economic benefit of the funds through satisfaction of his forfeiture liability to the USA. See Old Colony Tr. Co., 279 U.S. at 729; Larotonda, 89 T.C. at 291; Carione, 96 T.C.M. (CCH) at 358. Moreover, the fact that petitioner did not willfully or purposefully cause the distribution is irrelevant. See Rodrigues, T.C. Memo. 2015-178, at *11; Schroeder, 78 T.C.M. (CCH) at 568. Petitioner constructively received and must include in his gross income a taxable distribution of $427,518 from his retirement account with T. Rowe Price.” T. C. Memo. 2024-16, at p. 14.

Judge AIM Marshall does fall for Lonnie’s plight, somewhat. But she sticks Lonnie for late-filing and late-paying add-ons.

“While we are sympathetic to petitioner’s difficulties, we decline to conclude that his failure to timely file and timely pay were justified by reasonable cause. In petitioner’s declaration… petitioner alleged that (i) he never received the Form 1099–R from T. Rowe Price, (ii) he had not earned any income since 2015, (iii) he was unaware of any filing obligation, and (iv) as a result of the criminal forfeiture and his divorce… he was unable to pay the tax due.

“Petitioner knew of a general duty to file his tax return as he stated in his declaration that he had ‘habitually’ done so in previous years. He was also aware of the forfeiture that was part of the judgment in his criminal case. Nonetheless, petitioner asserts that he did not know that he had to file a tax return because he did not receive the Form 1099–R. Nonreceipt of tax information forms, such as a Form 1099, does not excuse a taxpayer from his or her duty to report income.” T. C. Memo. 2024-16, at p. 19.

So Lonnie has a Rule 155 beancount on tap, with $500K of deficiency and add-ons at the end. But it gets worse, as my source tells me Lonnie also got a civil judgment against him and his pharmacy from USDCEDKY of $4,474,000.

So why is Lonnie fighting about $500K in Tax Court (and doing a good research and briefwriting job, at that)?

Well, Judge AIM Marshall says USDCEDKY also gave Lonnie, at no extra charge, a “term of imprisonment for a term of 360 months, three years of supervised release, and a criminal monetary penalty of $7,100.” T. C. Memo. 2024-16, at p. 2. So see the title of this blogpost first written at the head hereof.

No, I’m not pitching a charity. I’m repeating an ancient cliché, the one about the shoemaker’s children never having shoes (see infra, as my high-priced colleagues say). I don’t know what the parents of Paulette Thompson, T. C. Memo. 2024-14, filed 2/5/24, did for a living, or what shoes Paulette’s three adult children may have. But I do know that Judge Christian N. (“Speedy”) Weiler tells us that “Mrs. Thompson confirmed that she had acted as a paid return preparer and that she had prepared dozens of tax returns during the tax years at issue—just not her own.” T. C. Memo. 2024-14, at p. 15. In fact, in each of the three (count ’em, three) years at issue, Mrs. Thompson grossed north of $50K from tax prep, aside from her farming operations.

She didn’t file Sched C for any such year, but put the tax prep on her late-filed and unprocessed Sched F as “Custom Hire (Machine Work).” T. C. 2024-14, at p. 8.

Needless to say, Mrs. Thompson isn’t a great witness on the trial, and doesn’t fare so well in the substantiation stakes.  And the returns she did file, she filed late. Pro se, of course, so there are some painful “own goals” here..

I’ve said it before: “Often the shoemaker’s children have no shoes. Preparers often do what they’d berate their clients for doing.” See my blogpost “The Snitches and the Fiction Writer,” 6/1/16.

I wish I could buy stock in discovery; it is surely a growth industry, spread across numerous tax sectors, from Dixieland Boondockery to the popularly-viewed sunsets in Ogden, UT. Here’s Judge Christian N. (“Speedy”) Weiler’s take on the former, Longwood Preserve Holdings, LLC, Longwood Preserve Investors, LLC, Tax Matters Partner, Docket No. 12421-19, filed 2/2/24.

First, the Longwoods want a list of IRS’ third-party contacts. IRS says no, Greenberg Express [sic; should be Greenberg’s Express] and attorney work product for trial. Judge Speedy Weiler: “We disagree; and do not find the mere disclosure of names or identities of third parties that respondent has contacted to be privileged or otherwise in violation of Greenberg Express [sic].” Order, at p. 1. But as for what the above third parties told IRS, that’s out. Order, at p.2.

Next, the Longwoods want legal opinions and/or attorney work product, which they don’t get. They have BoP.

The Longwoods want an appraiser’s complete appraisal review report and work file, copies of all other appraisals of the property at issue, and all other valuations used as comparable for the conservation easement at issue here. IRS “objects to this request on the grounds of relevance, in violation of Rule 143(g) and on the grounds of privilege under the attorney work product doctrine. Finally, respondent notes how all responsive documents were furnished….” Order, at p. 2. Sustained.

Finally, “petitioner seeks an email from Mr. R [appraiser]…, which was referenced in documents received pursuant to a FOIA request. Respondent objects to the Request arguing the email is irrelevant to the proceeding and contains third party return information protected under section 6103. Since section 6103 protects third party tax information, including return information, respondent contends the exception under section 6103(h)(4)(B) does not apply here. Petitioner, on the other hand, contends an email is not a ‘return’ as protected under section 6103. In addition, petitioner argues the email is relevant because it contains a general discussion of ‘business use’ of donated property by respondent.

“The court does not find an email from Mr. Robertson to be a ‘return’ as contemplated under section 6103; however, the email may very well contain a taxpayer’s ‘return information’ as described in section 6103(b)(2). The Court notes how ‘return information’ does not include ‘data in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer.’ See I.R.C. §6103(b)(2). Accordingly, the Court will sustain in part, and overrule, in part, respondent’s objections to petitioner’s Document Request 5, and order that respondent produce the responsive email, after redacting any third-party taxpayer’s ‘return information’ contained in the email and as described in section 6103(b)(2).” Order, at p. 2. (Name omitted).

Happy hunting ground for discovery geeks.