Attorney-at-Law

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THERE ARE DAYS

In Uncategorized on 10/19/2018 at 16:41

And There Are Days

There are days when the life of a blogger is a land of milk and cliché, when surfeit becomes embarras de richesses, as Sinaiatical full-dress T. C.s and no less weighty T. C. Memo.s vie with designated hitters. The cornucopia overflows with “somber reasoning and copious citation of precedent,” combined with literary skill, and gravitas without over-portentousness.

And then there are days. Usually Fridays, more often than not before three-day weekends, but not necessarily.

I remember a super-efficient office manager three (or was it four?) law firms ago, whose word was law. Offending her meant being sent to a real estate closing of unendurable length, at the outermost reaches of public transport, on a Friday afternoon, before a three-day weekend, in a snowstorm.

Fortunately, such is no longer my fate, but today is a day of drought. No opinions, no designated hitters, only Judge Holmes again dissing the partitive genitive and Ch J Foley correcting a caption to show reports of petitioner’s death were greatly exaggerated.

Enough. See y’all Monday.

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LEADING AT THE TOP OF THE STRETCH

In Uncategorized on 10/18/2018 at 17:16

More than a couple times (hi, Judge Holmes) have I torn up tickets on the leader at the top of the stretch who never quite got there at the wire. Sometimes it was accompanied by just a sigh; other times, it featured imprecations hurled to the heavens, excoriating owner, trainer, jockey, stablehands, dam, sire, and the track announcer. But at the end, it was just another loss.

Well, I feel that way today, although I send no imprecations to the Glasshouse crew, and only my deepest respects to STJ Daniel A. (“Yuda”) Guy, who presided at today’s off-the-bencher, Xiangcun Shi, Docket No. 6852-17S, filed 10/18/18.

First, the post parade.

X e-filed a detailed 1040, with schedules, showing all kinds of numbers for his “international sales” business. The return featured his name, SSAN, address and phone number. The tax due stated therein was paid by credit card.

It wasn’t clear from the record who prepared same, but IRS small-d (this is a nonpolitical blog) democratically issued a SNOD, disallowing deductions in all directions.

X timely petitions.

Now the bell sounds, and X leaps from the starting gate, as the Taishoff no-prize, best-excuse sweepstakes is off.

“Petitioner alleged in the petition and asserted at trial that the tax return in question was totally fabricated, that he did not work or otherwise conduct any trade or business in [year at issue], and that the tax return was filed without his knowledge to ‘trap’ him.” Transcript, at p. 5.

X claims he graduated college in China, came to the US and ran a travel business for 10 years, filing returns all the while, and then retired. In the year at issue, he was supported by his “affluent daughter” in China (a consummation devoutly to be wished), who apparently bankrolled X’s trips to the homeland that year to care for his aging parents. And, while there, he apparently attended various health and wellness seminars, all paid for by said daughter.

Now we come to the top of the stretch.

“Petitioner testified that on one of his trips to China in [year at issue], his girlfriend had suggested that he meet with an individual in Beijing who might assist him in obtaining U.S. citizenship. Petitioner says he met with the unnamed individual who told him that he should file a Federal income tax return to enhance his chances of gaining U.S. citizenship. Petitioner further testified that he provided this individual with personal information, including his social security number and credit card information. Finally, petitioner testified that the individual later became unhappy with him after he rejected the individual’s request for a loan. Petitioner failed to identify the individual in question.” Transcript, at p. 6.

X claims the unnamed person filed the phony return. Now, while there are many bogus returns filed by identity thieves fraudulently seeking refunds, I’ve yet to hear of an identity thief who pays taxes in someone else’s name.

Still, X is leading in the stretch.

We come to the wire.

“Although petitioner asserts that the tax return was a fabrication, he nevertheless offered a few receipts in an attempt to substantiate some of the expenses claimed on Schedule C. The Court finds that petitioner did not present any objective evidence to corroborate his testimony that the tax return was a complete fabrication. There would seem to have been a number of avenues available to petitioner to provide his case, but he offered the Court nothing but his own self-serving testimony.” Transcript, at p. 8.

STJ Yuda, it’s hardly fair to call testimony “self-serving” when the witness stipulates in evidence that totally destroys the witness’ own case. However, see my blogpost “A Joy Forever? – Not Hardly,” 3/31/14, where distinguished counsel did just that.

So X fades to also-ran status. “The receipts attached to the stipulation of facts bear no discernable relationship to the professional and legal expenses in dispute. On this record, respondent’s determination that petitioner is liable for a Federal income tax deficiency is sustained.” Transcript, at p. 9.

Too bad. I had high hopes for X.

NO “DEFINITE MAYBES” – PART DEUX

In Uncategorized on 10/17/2018 at 18:29

Mega-movie-mogul Samuel Goldwyn (the pivot man in Metro-Goldwyn-Mayer, a/k/a MGM) was noted for his Berra-like (or better, Goldwyn-like) neologisms. Among these was the term “definite maybe,” apparently meaning a proposition to which he would accord just a trifle more consideration than a flat “maybe,” meaning “no.”

Today, absent any opinions, we have a designated hitter from STJ Robert N. Armen, The Judge with a Heart. Unfortunately, Dana Ann Cheshier, Docket No. 19154-16SL, filed 10/17/18, gives him nothing with which to work his sympathies, not even a definite maybe. She provides neither missing returns, nor a petition from the SFR-derived deficiencies, nor timely responses to orders, nor yet a Form 8857 innocent spouse request.

Even when remanded, Dana Ann failed to deliver. Uncontested summary J for IRS.

“On her Form 12153 petitioner did not check the box for “Innocent Spouse Relief” but she did write “Maybe ?” opposite the printed words on the form preceding that box. However, petitioner never submitted Form 8857 (“Request For Innocent Spouse Relief”), nor did she otherwise pursue the matter during the administrative proceeding. Accordingly, such matter need not be considered further.” Order, at p. 7. (Citations omitted).

Long ago, a casual reader reprimanded me for taking lightly the plight of those finding themselves in Tax Court with little or no comprehension of what they must do. I noted my interlocutor was light on specifics and long on invective. As a lawyer, I’m used to that.

Still, Dana Ann’s plight is exemplified by “Maybe?”

Might have been better to send her to a LITC, if such is available in Dana Ann’s part of TN.

BEARING BURDENS HEAVY TO BEAR

In Uncategorized on 10/16/2018 at 10:14

Whatever will Tax Court get up to when I take an evening off to go to the opera? Even though Judge Chiechi is officially fully retired (see my blogpost “Judge Chiechi Retires – Fully,” 9/25/18), she had a decision last evening that almost had me following Judge Holmes’ lead and quoting Scripture. It’s another church case, and it brings out the importance of bearing the burden of proof.

Richard I. Presley and Martine N. Presley, 2018 T. C. Memo. 171, filed 10/15/18, don’t get a break from the Section 6662(a) chop, despite having three (count ’em, three) CPA’s (one of whom also had a master’s degree in tax) to guide them. Plus a qualified appraiser.

No scenic easement here, but a donations of land (or maybe ponds) to grow blueberries to fund their non-profit family church via a for-profit LLC, their residence (where they resided post-donation, a no-no), and a tractor-mower.

You can, if you wish, read all 103 (count ’em, 103) pages of Judge Chiechi’s deconstruction of the trial record. Richard’s and Martine’s crew of experts reminds me of G. B. Shaw’s remark about trying to grow roses on opera house seats by hiring expensive gardeners.

But the key is knowing what you have to prove and getting it into the record.

Editorializing, I think Judge Chiechi came down a wee bit too hard on Richard and Martine when it came to the accuracy chops. True, their experts may have been less than brilliant on the stand, and Richard may not have been the best of witnesses, but Judge Chiechi has assigned to Richard and Martine foreknowledge of the inconsistencies and contradictions IRS’ astute trial counsel brought out on the trial.

If Richard and Martine were capable of the cross-examination meted out to the experts by IRS’ trial counsel, chopping them might answer. To expect a preacher and a blueberry farmer to do so is loading too heavy a burden, and woe to Richard’s and Martine’s trial lawyer.

Oops, almost quoted Scripture again.

Edited to add: Thinking it over, maybe I was a little too heavy on Judge Chiechi. After all, I didn’t see the trial, or hear and watch the witnesses’ testimony. The experts may have been far less brilliant on the stand than their resumes. And Richard and Martine might have told a tale that was less than compelling.

Of course, few people find the witness stand a pleasant locale in the best of circumstances. I remember how distasteful it is, even when one wins.

WELCOME, JUDGE COPELAND

In Uncategorized on 10/15/2018 at 14:49

Let’s give a big Tax Court enthusiasts’ welcome to Judge Elizabeth Ann Copeland, who joined the “small court” on Friday last. Her delayed appointment was reinstated (or whatever the technical term is), and prompt Senatorial confirmation followed.

Nice to see the system working.

My colleague Peter Reilly, CPA, will be no doubt pleased to note that Judge Copeland is a fellow-CPA, as well as being a Tax Notes 2012 Tax Person of the Year. She is also a long-time Texas practitioner.

I’m anticipating great things from Judge Copeland.

I SAID EVEN THOUGH YOU KNOW WHAT YOU KNOW

In Uncategorized on 10/12/2018 at 14:53

The Beatles’ 1966 conclusion to their hit album gives me the title for this essay. Gail Goldberg, Docket No. 13148-14L, filed 10/12/18, gives me the rest.

Gail is fighting an NFTL, but had sent in a Letter 12153 late after the NFTL was sent to her. So there was no appeal, and the NOD she got dismissed her request for a CDP was late. At best she could get an equivalent hearing, from which there is no appeal to Tax Court.

Gail is inventive.

“…petitioner appeared generally to take the position that the circumstances underlying this proceeding should operate in lieu of a determination to confer jurisdiction on this Court, presumably implying that the… decision letter attached to the petition should be treated as a determination with respect to the Notice of Federal Tax Lien. More specifically, statements by petitioner suggested an attempt to rely on an extensive, years-long history of interactions with the IRS regarding the…tax liabilities. The saga began with investments by petitioner’s spouse in oil and gas TEFRA partnerships, which partnerships were subsequently examined and proposed adjustments litigated before the Tax Court between 2008 and2013. Corresponding proposed adjustments were then made to petitioner’s joint returns, and the couple sought to challenge those changes via a protest submitted…after learning about them through a Form 4549-A, Income Tax Discrepancy Adjustments…. Petitioner thus contended: ‘Respondent cannot successfully argue that Petitioner did not respond to notices that were not timely responded to….’ In a similar vein, petitioner added: “Respondent also cannot argue that the IRS has not received timely noticed [sic]… as this matter as a group of plaintiffs, which include the Petitioner, has been in litigation with the IRS in the United States District Court, Chicago, Illinois, known as case #16CV6130 over these same issues’. Multiple documents pertaining to the protest and district court case were attached.” Order, at p. 3.

Ch J Maurice B (“Mighty Mo”) has the bad news for Gail.

“Unfortunately, whatever other proceedings and interactions petitioner may have had with the IRS cannot alter the necessity of complying with the definitive requirement to submit a Form 12153 (or an equivalent request) within the specified timeframe. Regrettably, such confusion is not uncommon given that the IRS frequently treats as separate processes or proceedings what taxpayers view as a single dispute.” Order, at p. 3.

“Hence, the record herein at this juncture contains nothing that might suggest a timely request for a collection due process (CDP) hearing as to the Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320. Petitioner’s attempts to rely on a protest sent more than a year earlier in response to an entirely different communication from the IRS and on other IRS-connected proceedings are unavailing for multiple reasons. In particular, the cited materials lacked the information required for a document to constitute a CDP request. See sec. 301.6330-1(c)(2), Q&A-C1, Proced. & Admin. Regs.; sec 301.6330-1(c)(2), Q&A-C1, Proced. & Admin. Regs. Moreover, insofar as the Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 was dated April 7, 2015, only items submitted to the agency within the pertinent 30-day window ending in May 2015 would be germane.” Order, at pp. 3-4.

At least there’s a form called an NFTL, and only one so denominated, and garnished with a timely-filed Form 12153, can make the cut for Appeals, and ultimately a timely-filed petition can qualify for Tax Court review.

As there’s no standard form for a SNOD, and as it doesn’t matter what IRS knows or says, best of luck, taxpayer.

 

 

 

 

 

FRAUD

In Uncategorized on 10/11/2018 at 21:44

But Not on the Court

Back in August, 2014, Judge James S (“Big Jim”) Halpern filed an opinion in Brown, 2014 T. C. Memo. 167, wherein the petitioners were mulcted for nearly everything IRS wanted, due in large part to the inadequacies of their attorney, whom I’ll call Wilf.

I’ve blogged the misadventures of more than one attorney whom I’ve called Wilf over the years, but this one is a new one on me. In any event, this Wilf is now out of the picture, as he was disbarred in August, 2015, and DC Cir affirmed same in 2017.

But now come Bassett H. Brown & Marcela M. Brown, Docket No. 28934-10, filed 10/11/18, seeking a Rule 162 vacation, based upon the fraud on the Court committed, allegedly, by Wilf.

It’s a wee bit late under ordinary rules, as 162s need to be made within 90 days after filing of decision. But fraud on the Court is special, because it undercuts the entire judicial process.

However, the hurdle is high, and Bassett (that’s Dr Bassett) cannot surmount same.

One must prove, by clear and convincing evidence, an unconscionable scheme or plan designed to influence the Court improperly, and that the Court was deceived thereby.

And not all fraud in a judicial proceeding is fraud on the Court. Because Dr Bassett (and maybe Marcela) were defrauded by Wilf’s negligence and incompetence doesn’t mean Judge Big Jim was taken in.

“… we concede that [Wilf] may have been untruthful with the Court in excusing his failures to obey our orders because he was out of the country, his computer crashed, or he had no ability to access the Court’s website. Nevertheless, even accepting that his excuses were untruthful, we believe that [Wilf] lied not to influence the outcome of the case one way or the other but to avoid reprimand by the Court and to excuse his failures to obey our orders. And while there maybe evidence that [Wilf] failed to introduce–though petitioners have failed to identify any–and certainly he failed effectively to argue their case (we struck petitioners’ brief as untimely), those factors did not work any corruption on our decision making. We were aware of [Wilf]’s inadequacies and warned petitioners of them. We decided this case on the evidence the parties, acting through their counsel, presented to us. We were not deceived, and certainly we were not improperly influenced or corrupted by [Wilf]’s thin excuses. Petitioners have failed to prove that [Wilf]’s untruths resulted in a fraud on the Court.” Order, at p. 7.

Wilf may have blown it, but Dr Barrett was there throughout. “Respondent points out that the Court, at the conclusion of the trial, recognizing [Wilf]’s shortcomings, advised petitioners to supplement their representation, yet they continued to rely on him, and, thus, they must bear the risk that his inadequate representation imposed.” Order, at p. 6.

Motion to vacate denied.

 

 

EH BIEN, VOILA AU MOINS QUI N’EST PAS BANAL – DEUXIEME

In Uncategorized on 10/11/2018 at 12:01

Please Pardon High School French

We old-time beaten-up, beaten-down, single-shingle, “general practitioner(s) of limited experience and mediocre qualifications” have seen clients play the games people play, and then some. Games undreamt-of by the late Eric Berne and unknown to anyone’s philosophy frequently swim into our bleary-eyed ken.

But today we have a new one on me so again I quote the taxi dispatcher of the Marne, General Joseph Simon Galieni. It’s sort of son-of-The-Scarlet-Letter; see my blogpost thus entitled 10/13/15, but this one is even more adventurous.

Ryan M. Richardson & Kathryn M. Richardson, Docket No. 15436-18, filed 10/11/18, seem to have timely petitioned a SNOD arising from alleged involvement in something called Clean Energy Systems, LLC. And said SNOD, dated 5/9/18, is properly attached to their petition.

So why does IRS move to dismiss?

Ch J Maurice B (“Mighty Mo”) Foley will tell us what IRS is telling him.

“…Among other things, attached to respondent’s motion to dismiss are: (1) as Exhibit A, a postmarked Substitute PS Form 3877, reflecting that January 31, 2018, deficiency notices for 2015 was sent by certified mail to petitioners at their last known address…on January 31, 2018; (2) as Exhibit B, tracking information obtained from the U.S. Postal Service showing those deficiency notices were delivered…on February 7, 2018, and (3) as Exhibit C, copies of those January 31, 2018, deficiency notices issued to petitioner for 2015, showing the last day for filing a timely Tax Court petition as to those notices would expire on May 1, 2018.” Order, at p. 1.

Except Ryan & Kathryn didn’t file their petition until 8/7/18.

Wait a minute, were there two SNODs for the same year?

IRS says “no way.” Here’s what IRS “reasonably believes.” Note that’s IRS talking, not Ch J Mighty Mo.

“…Respondent notes that the notice of deficiency attached [as Exhibit A] to the petition contains different dates on its first page. That notice of deficiency states that it was issued on May 9, 2018, and that the last day to file a petition with the Court is August 7, 2018. Respondent has determined that this page has been altered, presumably in a bid to secure the jurisdiction of this Court. * * *

“…Respondent reasonably believes that the dates used in the alteration were copied from a notice of deficiency issued to different taxpayers. That notice of deficiency is the basis for the Court’s jurisdiction in Leto v. Commissioner, Docket No. 15167-18, a case that was timely filed. Like petitioners, the taxpayers in the Leto case are purported investors in Clean Energy Systems, LLC.” Order, at p. 2.

Both the Leto petitioners and Ryan & Kathryn are self-representeds. And the same IRS counsel is assigned to both Leto and Ryan & Kathryn. I haven’t yet blogged Leto because IRS filed its answer in that case last week, and nothing has happened.

But Ch J Mighty Mo wants something to happen here.

Let Ryan & Kathryn tell him whether they ever got a SNOD back in February, and how come they got the May SNOD.

If they can’t tell a good story, they’ll get tossed. Although Ch J Mighty Mo is not prejudging anything, this might go beyond their getting tossed, maybe so.

THE ENVELOPE, PLEASE – PART DEUX

In Uncategorized on 10/11/2018 at 00:47

Wayne R. Felton and Deondra J. Felton, 2018 T. C. Memo. 168, filed 10/10/18, has Judge Mark V Holmes quoting Holy Writ, a commendable departure from his sometimes picturesque style. Alas, at the end of the day, the blue envelopes stuffed with cash are income to the Rev. Wayne, founder and beloved pastor of the Holy Christian Church of Minneapolis, MN.

Rev. Wayne’s church had three envelopes: white, gold and blue. White envelopes were for  operational offerings – keeping the lights on, paying Rev. Wayne a salary (although for years he didn’t take one), and operating costs. These were readily available, and the contents thereof made their way into the church’s books of account. Gold envelopes contained cash and checks for special programs and retreats, and these likewise were booked.

The blue envelopes were special gifts to Rev. Wayne, and weren’t booked. Rev. Wayne disliked the “shake-hand” money pressed into the pastoral hand as the worshipers filed out of the church, so the blue envelopes were made available upon request, but not generally handed out. Judge Holmes obliges us with copies of the blue envelope and white envelope, and tables differentiating between the two and the proceeds of each.

For each of the years at issue, the blue envelopes contained better than $200K. Nisht azay gefaylach, as they say around the Holy Christian Church never. These sums never made it into the church’s books, onto Rev. Wayne’s Sched C or 1040, but they appeared on the SNOD.

Well, gifts aren’t taxable per Section 102(a), right?

Well, no, they aren’t, if they are gifts and not disguised salary and wages.

To begin with, there is no bright-line test. While a gift must be made from motives of disinterested love and benevolence, subjective intent does not decide. Ultimately, the tribunal’s experience with the mainsprings of human conduct must be applied to the facts and circumstances of the individual case.

But judicial precedent is a restraint on judicial vagaries. And while gifts to religious leaders are commonplace, Fifth Circuit has a pattern jury instruction that sums up the tax angle. “The federal income tax is levied on income received by ministers. When an individual provides ministerial services as his trade or business, controls the money he receives in that business, and receives no separate salary, the income of that business is taxable to the minister. Voluntary contributions, when received by the minister, are income to him. Payments made to a minister as compensation for his services also constitute income to him. If money is given to a minister for religious purposes, any money used instead for the personal benefit of the minister becomes taxable income to him.” 2018 T. C. Memo. 168, at p. 20. The case from which this is taken is United States v. Terrell, 754 F.2d 1139, at p. 1148-49 (5th Cir. 1985).

Per contra, as my high-priced colleagues would say, there are a couple cases (this is Judge Holmes, after all) where ministers got substantial payouts, but they were either ill or retiring, and weren’t expect to continue ministering to the payor flocks.

But payments substantially in excess of salary, made routinely, on behalf of the congregation generally and not individually, are income.

“From personal observation at trial we think it highly likely that Reverend Felton would follow his vocation whether he and his church got envelopes of any color. But we also think that the exhortation by the Supreme Court…to focus on objective evidence of a donor’s intent means we have to ask whether the donations are of the magnitude and type that would make us doubt that what is called a gift amounts to one in reality.” 2018 T. C. Memo. 168, at p. 29 (Citation omitted).

Now the blue envelope payments were made by individuals, not by the congregation generally, and weren’t solicited. But the amount and regularity of the blue envelope money (varying only 10% in the two years at issue), amounting to almost double Rev. Wayne’s handsome parsonage allowance plus his stated salary, speak louder than testimony.

“As another former seminarian is widely thought (though unlikely actually) to have said: ‘Quantity has a quality all its own.’ When comparatively so much money flows to a person from people for whom he provides services (even intangible ones), and to whom he expects to provide services in the future, we find it to be income and not gifts.” 2018 T. C. Memo. 168, at p. 34.

And Rev. Wayne, who prepared his own tax returns and filed them late (and only after the IRS came calling), never showed he made any effort to ascertain his liability. Late-filing plus substantial understatement (five-and-ten) chops for Rev. Wayne.

 

 

 

 

MADNESS IN HER METHOD?

In Uncategorized on 10/10/2018 at 23:31

The method (accounting type) seems to be a non-factor, as Walter J. Antonyshyn and Georgiana L. Antonyshyn, 2018 T. C. Memo. 169, filed 10/10/18, reprise Georgina’s real estate professionalism, and do no better than they did in my blogpost “Madness In His Method?” 4/6/16.

Judge Ashford has this one.

Back two years ago, Georgina was fighting a lien after her professionalism claim collapsed.

Now she tries again, but fails. She hired professional management firms to do the day-to-day, so what hours she can substantiate were investor type, and thus fall foul of Reg. Section 1.469-5T(f)(2)(ii)(B).

And her records are internally contradictory and thus unreliable.