Archive for the ‘Uncategorized’ Category


In Uncategorized on 08/21/2017 at 16:42

As darkness overspread our land, The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Indefatigable, Ineluctable, Ineffable, Incontrovertible, Irrepressible, Illustrious and Irrefragable Foe of the Partitive Genitive (although perhaps in recovery), Old China Hand and Master Silt Stirrer, Judge Mark V. Holmes enlightens us and the Self-Insurance Institute of America, Inc., in Benyamin Avrahami and Orna Avrahami, 149 T. C. 7, filed 8/21/17.

You remember Ben and Orna? No? Then see my blogposts “The Front – Part Deux,” 12/18/15, and “The Fighting Lawyer,” 3/29/16.

Well, now the whole captive insurance business is up for grabs, and Judge Holmes is the man.

The Avrahamis had three jewelry stores and three shopping centers. They also had what they called an insurance company called Feedback, owned by Orna, which paid no claims, but lived up to its name by feeding back to the Avrahamis a lot of the deducted premiums the Avrahamis sent them.

Their CPA turned the Avrahamis on to the Fighting Lawyer, who set up their captive in St. Kitts. I’ve been there. It ain’t much. But the captive filed a 953(d) election to be taxed as a US C Corp, and a Section 831(b) small insurance company election.

Notwithstanding the captive, the Avrahamis insured their multiplex business with US commercial insurers, and IRS has no beef with that. The captive did tax risk, litigation risk, and other exotics.

They also dealt with a St. Kitts outfit that insured against terrorism risks. They also joined a quota share (reinsurance) deal, a favorite of Lloyds of London brokers who were stealing from their Names. Only here it was a roundy-round to move premium money back to the cedant.

The Avrahamis, ever invented, created an entity named Belly Button, Inc., to make loans to themselves with money from Feedback. Judge Holmes says the “omphaloskeptical” St. Kitts insurance regulators gazed askance at these.

IRS elevated this scam to the “dirty dozen” list in 2015 and made them transactions of interest in 20216. See Notice 2016-66, 2016-47 I.R.B. 745; I.R.S. News Release IR-2015-19 (Feb. 3, 2015). But this is the first such case that went to trial.

The bottom line, despite the overlay of tax breaks for small mutual insurance companies, is whether risk has truly shifted, been diversified (so that “no man is undone, but rather the losse falleth lightlie upon many, and not heavilie on fewe” as the English said in 1601), and has been run like a for-profit insurance company.

Remember Rent-A-Center? See my blogpost “Leading Captivity Captive,” 11/4/16. That captive was OK.

Just not the Avrahamis’.

“But it [the captive] might also be run so that related parties pay the captive deductible insurance premiums of just under $1.2 million a year.  In turn the captive might pay out few if any claims, might make a section 831(b) election so it pays tax only on its investment income, and might quickly build up a large surplus.  Then, if the captive were to be licensed and regulated in a jurisdiction with extremely low reserve requirements and loose rules on related-party transactions, it might lend its surplus back to its affiliates.  This might generate nearly $1.2 million in tax deductions while arguably only moving money from one pocket to another.  Or perhaps the captive could be owned by a Roth IRA, which might mean it could make large dividend payments to its stockholder, creating a form of deductible, yet tax-free, retirement savings.  Or perhaps the captive could be owned by its business owner’s children or an irrevocable family trust, which might enable the avoidance of future gift and estate taxes.” 149 T. C. 7, at pp. 58-59.

There was an insufficient spread of risk on the facts, the terrorism quota share was a true roundy-round, the captive didn’t pay claims until the IRS was all over the Avrahamis, and at the end of the day, Judge Holmes finds it wasn’t a true insurance company.

“We have to find that Feedback’s operations left something to be desired.  It dealt with claims ‘on an ad hoc basis.’  It invested only in illiquid, long-term loans to related parties and failed to get regulatory approval before transferring funds to them.  And we will not overlook the fact that the Avrahami entities made no claims whatsoever against Feedback from its inception in 2007 until March 2013–two months after the IRS sent the Avrahamis documents about the audits of the returns of [Avrahamis’ entities] that suggested Feedback was a sham.  And even the claims Feedback did receive it dealt with in questionable ways.  Most of the claims were approved despite being filed late–the policies required that Feedback be notified within 30 days of the loss ‘as a condition precedent to payment of any benefit hereunder.’” 149 T. C. 7, at pp. 78-79.

And Feedback only had cash and loans to the Avrahamis’ entities. But the caselaw says that adequate capitalization in the state or country of organization is sufficient. And even though in St. Kitts to be an insurance company you only need what you need for a MegaMillions ticket (“all you need is a dollar and a dream”), that’s enough.

The policy language was not of the best (claims-made vs when-occurred), but the Avrahamis produced the Incomprehensible Actuary. Judge Holmes couldn’t figure him out, and I didn’t even try.

Finally, a loan between Feedback and Belly Button was a real loan, although barely, so no income to Orna except interest.

The Avrahamis have a partial escape from the accuracy chops, as one person they relied upon had credentials, full information, and wasn’t a promoter.

The rest of you captors, beware.


In Uncategorized on 08/19/2017 at 00:04

It is well, if you are an attorney drafting a motion for summary J, to make it easy for the judge to decide in your favor. And not only in a motion for summary J.

IRS’ counsel in Talib I. Karim, Docket No. 17407-15L, filed 8/18/17, needs reminding.

And who better to remind IRS’ counsel gently but that Obliging Jurist, Judge David Gustafson? And in a designated hitter, making easy the late night work of the blogger surfeited with family’s overwhelming hospitality.

Of course the motion is accompanied by the usual declaration, in this case of the SO who handled the CDP at issue here, plus a bunch of exhibits thereto.

Unhappily, IRS’ counsel didn’t marshal evidence and lay bare the proofs.

“The motion itself consist [sic] of 21 numbered paragraphs. However, the factual assertions in the motion are not in a section distinct from the motion’s legal argument. Paragraphs 4-9, and 12-13 appear to consist of statements of fact on which the motion is based (interspersed among paragraphs making legal argument). The SO’s declaration authenticates documents that are attached thereto as exhibits, but the declaration does not otherwise state the facts underlying the motion. It may be that support for the motion’s factual assertions could be found in exhibits, but we decline to take on that project.” Order, at p. 1.

Maybe I’m just an old fogey, but legal arguments get made in a memorandum of law or in a brief, not in the motion itself. Just the facts, ma’am, as the late Jack Webb used to say.

Tal is flying solo in this one, and judges tend to make life a wee bit easier for the hapless pro se.

Howbeit, “Ideally, whether or not the petitioner is self-represented, a motion for summary judgment will include (either in the motion itself or in an accompanying memorandum) a separate section of numbered paragraphs stating the proposed undisputed facts, and each factual assertion will be supported by a citation to a declaration or an exhibit. The Court can therefore more efficiency evaluate the motion, and the non-movant can more fairly be required to respond to the factual assertions.” Order, at pp. 1-2.

So, IRS counsel, your motion is denied without prejudice. If you decide to do it right, you need not resubmit the declaration and exhibits.

I do not recommend asking the judge to do your work. It is an out-of-title assignment.


In Uncategorized on 08/17/2017 at 18:15

I must again apologize for loquacity and lame attempts at humor today. I throw myself on the mercy of the Court, and hope Judge Posner will forgive me.

As promised, here’s Kurt Hickam and Michelle Hickam, 2017 T. C. Sum. Op. 66, filed 8/17/17, a small-claimer from STJ Diana L. (“Sidewalks of New York”) Leyden. It’s another real estate pro with dodgy substantiation, so nothing novel about that. And Kurt is the only one playing this hand.

The interesting part is that Kurt wants to add in his mortgage brokering hours on top of his running three (count ‘em, three) rental properties for self and family, for which he did everything but keep good time records.

Kurt claims his mortgage brokering is enough of  a real estate activity to qualify within Section 469(c)(7)(C).

“Real property trade or business.–For purposes of this paragraph, the term ‘real property trade or business’ means any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business.” 2017 T. C. Sum. Op. 676, at p. 13.  (Emphasis by the Court.)

“Mr. Hickam focuses on the word ‘operation’ and argues that his mortgage brokerage services and his loan origination services are performed in trades or businesses in real property operation because the underlying assets in both services are real property.” 2017 T. C. Sum. Op. 66, at p. 13.

Kurt also gripes that IRS retroactively applied CCA 201504010 (Dec. 17, 2014), which said mortgage brokerage wasn’t real estate activity. But that’s nothing new, says STJ Di.

“The legislative history of the statute supports the consequence of this distinction.  Congress considered including ‘finance operations’ in the activities listed in section 469(c)(7)(C) but specifically did not do so.  See H.R. 2264, 103d Cong., sec. 13143 (1993); H.R. 1414, 102d Cong. (1991); S. 1257, 102d Cong. (1991); H.R. 3732, 101st Cong. (1989); S. 2384, 101st Cong. (1989).” 2017 T. C. Memo. 66, at p. 16.

Mortgage brokering, however much time Kurt put in, doesn’t get into the equation.

Kurt relies on a case where a real estate and mortgage broker got treated as a real estate pro, but IRS and broker stipulated she was a pro as to three rental properties she owned, without taking any brokerage time into account. Apparently her timesheets were better than Kurt’s.

But STJ Di gives Kurt a bye from the 20% chop IRS is holding over him.

“The question of whether Mr. Hickam was a real estate professional was partially resolved on technical grounds—whether his mortgage brokerage services and loan origination services constituted real property trades or businesses under section 469(c)(7)(C).  Although the Court found that neither service constituted a real property trade or business and notwithstanding his failure to maintain adequate records, the Court finds that Mr. Hickam acted reasonably and in good faith in taking that position for the years at issue.  Petitioners are therefore not liable for a section 6662(a) accuracy-related penalty….” 2017 T. C. Memo. 66, at pp. 25-26.

The taxpayer’s friend – that’s STJ Di.




In Uncategorized on 08/17/2017 at 17:40

Sorry, guys, it’s been a tough day. And today’s Sum. Op.s  were uninteresting, although I will blog Kurt Hickam, under separate cover.

And I’m subject to promissory estoppel until tomorrow to take up a new rant.

But to the rescue comes The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Incontrovertible, Indefatigable, ineluctable, Ineffable, Imperturbable and Incomparable Foe of the Partitive Genitive (although he is getting better, I must admit), Old China Hand and Master Silt Stirrer, Judge Mark V. Holmes.

He sends out a designated hitter, Paza Staffing Services, Inc, Docket 6881-12R, filed 8/17/17. Yes, 2012; the case is aged five years, while VSOP Cognac needs to be only four-and-a-half years old, I’m told. And the Docket suffix “R” is apparently a marker for retrofitting retirement plan cases.

This deal is the device of a certain Doctor Z (name omitted), who puts all the shares of Paza in an ESOP, of which he is sole trustee and beneficiary. The value of said stock grows from about $12K at inception to $333K in a year, which is the year at issue.

During the year at issue, Paza leases five employees from Golden Gate, another company of which Dr Z is sole owner, shareholder, officer and director. He pays himself an $83K annual salary from Paza during the year at issue. None of the leased employees from Golden Gate participate in the Paza ESOP.

Dr Z disputes IRS’ top-heavy disqualification of the Paza ESOP. He’s the sole participant, and anyway he doesn’t own the Paza stock, the ESOP does.

OK, but is it only Paza with which we’re concerned?

“The primary issue in this case stems from I.R.C. § 410(b)(1)(B), which requires qualified plans to benefit ‘a percentage of employees who are not highly compensated employees which is at least 70 percent of the percentage of highly compensated employees benefitting under the plan.’ But what group of people do we consider in our math? If we only need to include Paza employees in the group, then we need only confirm that [Doctor Z} is covered because he is Paza’s only employee. But Paza loses its case if we must include Golden Gate’s employees in the group. See I.R.C. § 410(b)(1)(B).” Order, at p. 3. (Footnote omitted; like the Ancient Mariner, Judge Holmes considers only one of three possible employee groups, but everyone agrees the other two are irrelevant).

So how does the IRC marry corporations for ESOP purposes? Why, Sections 1563(a)(2) and (f)(5) perform the ceremony. Where fewer than five (count ‘em, five) individuals own at least 80 percent of the total value of shares of all classes of stock of each corporation, and more than 50 percent of the total combined voting power, with this clause I thee wed.

So what, says Dr. Z? I don’t own any Paza stock, the ESOP does.

This is what, says Judge Holmes. “But [Dr Z] is the ESOP’s sole beneficiary, and he therefore has constructive ownership of the stock. I.R.C. § 1563(e)(3)(A). That means, that for our purposes, [Dr. Z] owns 100 percent of the value of the shares, and 100 percent of the voting power of Paza and Golden Gate. See I.R.C. §§ 1563(a)(2) and (f)(5). Therefore, Paza is a controlled group — consisting of Paza and Golden Gate. Id.” Order, at p. 4 (Footnotes omitted).

To end the suspense, the omitted footnotes say that Dr Z claimed his rights in the ESOP hadn’t yet vested for the year at issue. Now it was Judge Holmes’ turn to say “So what?” Vesting is not mentioned in the statute. Besides, Section 1563(a)(3) talks about an actuarial interest, and you got that.  Order, at p. 4, Footnotes 4 and 5.

So the five Golden Gaters are in, Dr Z and his ESOP are out, retroactive to year-at-issue and all subsequent years.


In Uncategorized on 08/16/2017 at 16:36

No, this has not become a religious blog. But the story of Wilfred Omoloh, 2017 T. C. Sum. Op. 64, filed 8/16/17 shows that being born again is not only a religious experience.

Here’s Wilf’s story, as told by CSTIJIW (Chief Special Trial Judge in Waiting) Lewis (“A Name Known to Fame”) Carluzzo.

“According to a birth certificate secured by petitioner apparently with much difficulty and issued more than 55 years after the event it records, petitioner was born on October 1, 1950.  According to various other records generated in response to information that he apparently provided, petitioner was born on October 1, 1952.  More often than not, people would like to be younger.  Here, at least as far as petitioner’s 2010 Federal income tax liability is concerned, it would be to his advantage to be as old as the above-referenced birth certificate shows him to be.

“This is so because after concessions, one of the issues that we must decide is whether certain distributions from qualified retirement accounts (IRAs) are subject to the section 72(t) additional tax.  If petitioner is as old as the birth certificate suggests, then he is not liable for the additional tax If he was born on a date. shown in various other documents, then he was not yet 59-1/2 years old as of the dates of the distributions and he is liable for the section 72(t) tax as respondent determined.” 2017 T. C. Sum. Op. 64, at pp. 2-3. (Footnote omitted, but it says Wilf changed his birthdate after giving another birthdate at previous Tax Court proceedings.).

So the issue is the 10% addition, as the 20% underpayment chop is uncontested.

OK, Wilf has the burden of proof. And, as CSTJIW Lew notes, “According to Helen Hayes, ‘age is not important unless you’re a cheese.’ Maybe so, but petitioner’s age (and the age of his former spouse) as of the dates the distributions were made pretty much determines the issues remaining in dispute.” 2017 T. C. Sum. Op. 64, at p. 3.

Well, Wilf has that recently-issued Kenyan birth certificate showing the winning date.

But IRS is dubious (to put it politely), and CSTJIW Lew shares their doubt.

“Respondent agrees that petitioner’s recently acquired birth certificate is authentic but questions its accuracy.  We share respondent’s concerns with the accuracy of the information shown on the birth certificate, information petitioner apparently provided to the issuing Kenyan agency during the pendency of this case.  After consideration of all of the evidence regard petitioner’s age, we are reluctant to make any finding regarding the date of birth of petitioner or his former spouse. That being so, petitioner has failed to establish that respondent’s imposition of the additional tax in the notice is erroneous.” 2017 T. C. Sum. Op. 64, at p. 7. (Footnote omitted, but it says that there’s no evidence of the age of ex-Mrs. Wilf, who was on the MFJ return for the year at issue).

Besides, IRS has a full-page list of documents going back 35 years, on all of which Wilf gives his birthdate as 1952, not 1950.

So IRS and CSTJIW Lew ask the same question posed to a much more exalted personage: “How can someone be born when they are old?”



In Uncategorized on 08/15/2017 at 16:30

Please pardon the technical arcana in my headline, but I feel for Ch J L Paige (“Iron Fist”) Marvel, the Hardliner from the Old Line State.

See Melvyn Duane Salter, 21045-15L, filed 8/15/17. Mel was pro se (of course, else why this headline?) back last October. And lost an off-the-bencher per order dated 11/3/16. No, I didn’t blog it.

But whatever the story was back last November (which you can read for yourself here), this is not the way to begin your trial.

“Mr. Salter: In the event that I don’t agree with any decision that’s made today, will I have the right to appeal?

“THE COURT: You have the right to appeal that when I enter a decision.” Order, at p. 1.

And yes, there is a Notice of Appeal form on the Tax Court website.

Mr. Salter writes Ch J Iron Fist a letter, wherein he claims he couldn’t find it on the IRS website. He’s right, because IRS and Tax Court are two separate bodies.

Of course, he’s only six months late with his letter, but Ch J Iron Fist gives him the Khadija Duma treatment.

Remember Khadija? No? Well, check out my blogpost “Go For It,” 1/23/12.

Ch J Iron Fist decides to let 4th Cir sort out whether Mr Salter can appeal late.

“As a notice of appeal, his letter would appear to be untimely. Pursuant to I.R.C. section 7483, a notice of appeal would have been due to be filed in Mr. Salter’s case ‘within 90 days after the decision of the Tax Court is entered’-i.e., on February 1, 2017. See also Tax Court Rule 190(a). No notice of appeal was filed by that time. Rather, Mr. Salter’s letter was mailed 6 months later. However, it will be for the Court of Appeals to decide the timeliness of Mr. Salter’s appeal. We simply discern that the recent filing “clearly evinced an intent to appeal”….” Order, at p. 3.

4th Cir., it’s your party.


In Uncategorized on 08/15/2017 at 15:31

I’ve blogged before about pro se petitioners mistaking certain IRS billets doux for SNODs and wasting sixty bucks and a dash to the post office, only to find out the IRS was having them on.

See my blogposts “SCAR Tissue,” 4/14/17, and “Fake Out,”12/16/14, among others.

Here’s another example. Yolanda W. Bentley & Omar A. Jones, Docket No, 20337-16S, filed 8/15/17. Yo & O have numerous beeves with IRS over the SNOD.

They claim IRS didn’t follow the IRM. Tough table tennis, says STJ Armen, usually The Judge with a Heart. The IRM gives taxpayers no rights. Besides, “…upon review of the totality of the documentation in the record, the Court is satisfied that the irregularities in the certified mail list do not preclude a conclusion of proper mailing of the duplicate copies of the notice of deficiency.” Order, at p. 4. The USPS track-and-confirm site seems to seal the deal.

Yo & O claim neither they nor their representative got the SNOD.

Mox nix, it was mailed to last known address, and that suffices. Collection isn’t yet in play, so Yo & O can claim what they like at the CDP, when and if.

STJ Armen almost gets it right, but stumbles at the last fence; the Form 2848 doesn’t designate the representative as the power of attorney; the power of attorney designates the representative. It’s a piece of paper, Judge.

Yo & O claim the SNOD is defective because it misdesignates the form of return they filed, and that leads me to my point (yes, dear friends and followers, there is a point).

“The notice [SNOD] ‘is only to advise the person who is to pay the deficiency that the Commissioner means to assess him; anything that does this unequivocally is good enough…. [M]istakes in the notice which do not frustrate its purpose, are negligible.’ O’Rourke v. United States, 587 F.3d 537 (2nd Cir. 2009), quoting Olsen v. Helvering, 88 F.2d 650, 651 (2d Cir. 1937).” Order, at p. 3.

Therefore, anything from the IRS that says, “you owe so much tax for such a year” might be a SNOD. Must the word  ”assess” or “assessment” be found in the communication? Not according to STJ Armen, nor his colleague CSTJIW (Chief Special Trial Judge in Waiting) Lewis (“Glorious Spelling”) Carluzzo, as more particularly bounded and described in my blogpost “Fake Out,” above cited.

There, you’ll remember, even though the Letter 4314C says there was a SNOD when IRS claims there wasn’t, Oola Mar & Marlin got the heave-ho. And CSTJIW Lew didn’t bother to complain.

But I sure did. How does a taxpayer know what is a SNOD, and what isn’t? Without engaging an EA, USTCP or attorney? And how are we supposed to know?

IRS can solve this simply. Atop everything they want to assert is a SNOD, put these words in bold-faced capital letters: STATUTORY NOTICE OF DEFICIENCY: PETITION TAX COURT, NOT IRS, IN 90 DAYS FROM DATE BELOW. SEE NOW.

But until they do, consider petitioning everything.


In Uncategorized on 08/14/2017 at 16:20

But Don’t Get Grossed Out

That is, welcome to the club of US taxpayers. Judge Foley delivers the greeting to Losantiville Country Club, 2017 T. C. Memo. 158, filed 8/14/17.

The Losantis’ members pay dues, assessments, food minimums, all of which are tax-exempt income to the Club. But the Losantis also allow the unaffiliated to engage in tennis, golf, swimming, and wine-and-dine, for a surcharge. The Losantis account and report for the unaffiliated on the gross-to-gross method.

Judge Foley explains:  ”Pursuant to the gross-to-gross allocation method, petitioner used the ratio of nonmember sales to total sales to determine what portion of indirect expenses was attributable to nonmember sales.” 2017 T. C. Memo. 158, at p. 3.

The Losantis lost money on the unaffiliateds every one of the years at issue (three, count ‘em, three). But the Losantis had investment and dividend income.

This kind of income draws tax like a moth to a flame, so the Losanti’s accountants amend their 990-Ts for the three years to offset the interest and dividends against the unaffiliateds’ expenses.

Now my thoroughly-experienced and battle-hardened readers know that 501(c)(7) R&Rs can’t offset interest and dividends against anything but profitable unaffiliated expenses…in other words, there has to be at least an intent to profit from the unaffiliateds after deducting interest and dividends from the net unaffiliated cash after gross-to-grossing out the operating expenses. And gross-to-gross is not how to show it. The Losantis can’t.

So, unrelated business income, and that gets taxed. See Section 512.

The Losantis’ accountants admit they’ve heard of Portland Golf Club; and not because they have a reciprocal membership agreement, if they in fact do, but because the Supremes blew off the offset dodge back in 1990 in that case.

So the Losantis are grossed out.

OK, I suppose you’re waiting for the obvious pun. I won’t disappoint my fans. Instead of Portland Golf Club, Judge Foley should have invoked the Losanti clause, Except there’s no such thing as a Lo Santi Claus.


In Uncategorized on 08/11/2017 at 17:54

That whimsical jurist, Judge Robert A. Wherry, was severely rebuked for loquacity and lame humor by Judge Posner of 7th Cir. when dealing with John E. Rogers’ Brazilian wax jobs. See my blogpost “There Goes the Neighborhood,” 9/3/13.

Now, almost four (count ‘em, four) years later, poor whimsical Judge Wherry has to keep a straight face while blowing off Mrs. Susan Hartigan, as she attempts to scramble out of Mr. Rogers’ neighborhood.

Whimsical Judge Wherry helped out this hard-laboring blogger by designating this gem, after I sweated over a residential contract of sale, of the kind we call mishpocha work; this means family and friends. Heaven help you if you blow one of these, and double that if you try to bill your actual time at your actual rate.

Don’t get me wrong, I love these guys; I was at their wedding, which took place on the day before the venue was wiped out by Superstorm Sandy.

OK, so now Judge Posner will yell at me for my loquacity and lame attempts at humor. My spies tell me His Honor has been known to look at this my blog occasionally. Of course, my spies disseminate as much misinformation as anything else.

Anyway, Susan spent years claiming, individually and through her husband Mr. Mike Hartigan the tax lawyer, that she was a partner in Leila Verde Fund, LLC, which held a 98% interest in Derringer Trading, LLC, Jetstream Business Limited, Tax Matters Partner, et al, Docket No. 20872-07, filed 8/11/17. Yep, this doozy has been running for ten years and not even breathing hard.

As recently as 2013, Susan filed an election to participate in the TEFRA FPAA, claiming to be a partner in Leila Verde, and designated husband Mike the tax lawyer to represent her.

Of course, way back in 2003 and 2004, Susan took a grand total of $3.3 million in ordinary loss write-offs from the DADS deals that John E. Rogers, Esq., concocted from Brazilian bad debts mixed with big US gains. And she twice claimed she was a partner in MA State court, ditto in FL Bankruptcy Court, ditto in Tax Court filings, likewise in depositions.

Lo and behold, in December last year, with trial coming on next week, Susan files an out-of-time election to participate, claiming she never was a partner.

Ya can’t make this stuff up.

Mike the tax lawyer now claims that the cash Susan paid for her interest in Leila Verde was stolen. According to Mr. Rogers, the interest was never conveyed, and Susan isn’t a partner. Of course, neither Susan nor Mike the tax lawyer agree to pay back the tax breaks derived from Susan’s deductions.  And Susan claims Mike the tax lawyer or someone else signed her name to the purchase agreement, so Statute of Frauds. So now Susan isn’t a partner.

For you civilians, the Statute of Frauds, one of King Charles II’s greatest accomplishments, says no one can be sued on certain kinds of contracts unless they sign on the dotted line. Except the only one who could sue Susan is Mr. Rogers, not IRS; IRS has no contract with Susan.

Judge Wherry isn’t even looking, much less buying.

We got the duty of consistency; if you take a tax position and benefit thereby, you can’t go home again if the SOL has run. Then we got tax benefit rule; Susan got a yuge write-off and it’s now too late for her to pay tax when she claims she never should’a gotten it. Susan, you’re stuck. And judicial estoppel; you told the Court over and over again you were a partner. In the immortal words of Carole King’s 1971 hit, “it’s too late, baby, now it’s too late.”

But Mike the tax lawyer is in there pitching when a lesser lawyer would be headed for the showers.

Susan claims Mike abused her. He was “very demanding, very imperious.” Order, at p. 7.

“Mrs. Hartigan argues to this Court that Mr. Hartigan caused her to make the Leila Verde purchase through deception, abuse, manipulation, exploitation and domination in order to shelter his own income. She claims to have derived no benefit from the investment. She also alleges that she did not prepare or review the Hartigans’ joint tax returns, nor did she sign the tax returns of her own will. Mrs. Hartigan further asserts that she was not ‘actively involved’ in the Sugarloaf lawsuit or the Seyfarth Shaw lawsuit except for depositions; her husband was the one taking all actions.” Order, at pp. 14-15.

Oh yes, Susan and Mike the lax lawyer are still married. But she claims they live apart. Cue the violins.

The problem is that innocent spousery, like the Ancient Mariner, requires one of three: either a deficiency proceeding, collection activity or a stand-alone, but not a TEFRA FPAA. The marital partnership isn’t part of a TEFRA partnership-level slanging match, so save it, Susan, for the after-trial afterparty.


In Uncategorized on 08/10/2017 at 17:25

Alan Gregory Woolsey and Anita Lee Woolsey. 2017 T. C. Sum. Op. 62, filed 8/10/17, are in front of The Judge With a Heart, STJ Armen, and they have help who joined them on the day of trial, namely, viz., and to wit, two heavy-hitting super-credentialed partners in a 130-lawyer powerhouse.

And they lose.

Because they go to trial without the key witness, their daughter who has struggled with drug abuse. But see below; they may know more than we do.

Here’s the story. I give the dates, contrary to my usual custom, because they matter.

“This case was originally called for trial on March 21, 2016, in San Antonio, Texas.  At that time petitioner Alan Gregory Woolsey (Mr. Woolsey) appeared and met with pro bono counsel, who advised him that Ms. [daughter] was an important witness.  Mr. Woolsey then orally moved for a continuance in order to allow petitioners time to call Ms.[daughter] as a witness on their behalf.  The Court granted Mr. Woolsey’s motion.

“In due course this case was called for trial on Monday, January 9, 2017, in San Antonio.  At that time petitioner Anita Lee Woolsey (Mrs. Woolsey) appeared and met with pro bono counsel, who then entered their appearances on petitioners’ behalf and tried the case that afternoon.  Although Ms. [daughter] was apparently in the hospital from January 6 through 9, 2017, and therefore not available to testify on January 9, petitioners neither requested that the case be tried later during the week of January 9 nor moved for a continuance.” 2017 T. C. Sum. Op. 62, at pp. 5-6. (Name omitted).

This is another of those TX heartbreakers (sans Tom Petty) where Papa and Nana supported daughter’s three young’uns for nine months of year at issue. Then Papa and Nana bought a mobile home for daughter and said young’uns, whereupon daughter’s no-account boyfriend moves in for the last three, and daughter and boyfriend file MFJ without benefit of clergy, judge, clerk or ship’s captain, and take the young’uns as dependents.

See my blogpost “A Heartbreaker,” 2/7/17, for an even sadder story. With a big-hearted TX pro bono attorney who also loses.

Well, of course in the jumpball between parent and grandparent, parent gets the exemptions and child credits for the young’uns. Daughter isn’t a qualifying relative because TX recognizes commonlaw marriage, and the MFJ return holds up for want of evidence that daughter and no-account weren’t married in the Eyes of Texas.

Please, please, please don’t think I’m unloading on the pro bonos, be they single-shingle, a couple guys in it together (hi, judge Holmes), or wearers of shoes of the purest white. They’re giving their golden hours for free to the Papas and Nanas, who would otherwise be utterly helpless before the pitiless pillory of Section 152 and the regs.

I’m sure STJ Armen would have given them a bye. The deficiency is only $6K.

But maybe daughter (and no-account) aren’t the witnesses you really want to put on.