Attorney-at-Law

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JUDGE HALPERN’S CONUNDRUMS – PART DEUX

In Uncategorized on 08/11/2022 at 00:38

Way back in 2018, I said in the case of Brian H. McClane, a pro se confronted with a bunch Judge Halpern’s conundrums (hi, Judge Holmes), “I can only commend Judge Big Jim for sending Brian H. to a LITC. I doubt Brian H. is prepared to deal with Judge Big Jim’s conundrums on his own.” See my blogpost “Judge Halpern’s Conundrums,” 3/13/18.

Chaps, you ain’t seen nuthin’ yet! Judge James S (“Big Jim”) Halpern has uncorked a sockdologer, swangdangler monsterpiece, in seven (count ’em, seven) pages of closely-wrought, artfully-crafted, lapidary prose, in YA Global Investments LP, F.K.A. Cornell Capital Partners LP, et al., Docket No. 14546-15, filed 8/10/22.

The issue seems straightforward enough: can YA write off an interest receivable deemed uncollectable? Somehow this never got dealt with on the trial two years back, and despite extensive briefing, Judge Big Jim has some questions.

Does he ever! Try this: “a. Do petitioners contend that YA Global’s financial reporting
determines whether accrued interest receivable is an asset separate from the underlying debentures for Federal income tax purposes? If so, on what authority do petitioners rely for that proposition?

“b. Can petitioners provide further explanation of their reliance on Treasury Regulation § 1.166-6(a)(2)? That regulation, again, addresses the treatment of mortgage debt after a foreclosure sale. How is that regulation relevant to YA Global’s circumstances? Do petitioners interpret the regulation as establishing a more general principle that supports their position? If so, what is that principle?

“c. Similarly, how are Revenue Rulings 81-18 and 2007-32 relevant to YA Global’s circumstances? Each of those rulings involved a federally regulated financial institution. The applicable regulatory standards required the write-off of past due interest. And under tax regulations that applied specifically to regulated financial institutions, each institution was allowed a corresponding tax deduction for its write-off, for regulatory purposes, of past due interest. Again, do petitioners derive from those rulings some broader principle that supports their position?” Order, at p. 4.

There’s much more, and there’s going to be a Zoomie on 8/31/22, when the parties get to answer the questions. So lay in the popcorn and the Anacin, and tune in at 2 p.m.

“HELD THE GORGEOUS EAST IN FEE” – PART DEUX

In Uncategorized on 08/10/2022 at 16:31

Playing a variation on the syndicated conservation easement gambit, Rock Spring, LLC, Rock Spring Investors, LLC, Tax Matters Partner, Docket No. 13010-20, filed 8/10/22, gave away the whole enchilada in fee simple assoluto to a 501(c). So unlike the Harbor Lofters, more particularly bounded and described in my blogpost “Hold The Gorgeous East in Fee,” 8/27/18, who didn’t, the Rockers gave it their all. No Swiss cheese, no improvements in or out, no “highly contestable readings what it means to be perpetual.”

Except .

The Rockers got the property from Isbell, who sold them a quarter of the whole of what Isbell bought for $880K in 2013. And the Rockers claimed a $23 million-with-an-M write-off, because their trusty appraiser (now an ex-appraiser per a consent order, but still in good standing when did this appraisal, so Judge Albert G (“Scholar Al”) Lauber doesn’t toss the appraisal out of hand) said there might be a mine on the land.

No, not dilithium crystals, although I was hoping for a moment. Limestone.

But even if the limestone was there for the taking, the late great Woody Guthrie’s choice for dictator got there first: the Tennessee Valley Authority, maker of electricity, reserved the right to flood the place in emergencies, and to control malaria.

IRS tries summary J, tossing the appraisal as unqualified. The claim trusty appraiser was unqualified, not because of the consent order (because that happened after this appraisal) but because trusty appraiser had prior guilty knowledge. See Reg. Section 1.170A-13(c)(5)(ii). But that’s a question of fact: who knew what when, and what did they do if they knew?

Next IRS tries “described in sufficient detail” so a stranger will know that what was appraised is what was contributed. IRS claims trusty appraiser bypassed the impact of the TVA’s flood-the-zone rights, wherefore the appraisal is not a qualified appraisal.

Well, first is substantial compliance. The appraisal does describe this particular Alabammy Boondock. And whatever TVA might or could do goes to the bottomline number, not what the property is.

“It appears to us that respondent seeks to convert a dispute about valuation and valuation methodology into a failure to satisfy the regulatory reporting requirements. [Trusty appraiser] described the donated property as a fee simple interest in specified acreage; this description would seem to enable ‘a person who is not generally familiar with the type of property to ascertain that the property that was appraised is the property that was (or will be) contributed.’ Treas. Reg. § 1.170A-13(c)(ii)(A). The documentation included with the appraisal acknowledged the existence of TVA’s reserved rights, but Clark neglected to discuss the potential adverse impact those rights might have on the Property’s alleged ‘highest and best use’ and value. Although that gap may affect the soundness of his conclusions, we do not think it amounts to a misdescription of the Property within the meaning of § 1.170A-13(c)(ii)(A).” Order, at pp. 4-5. (Footnote omitted, but it says the Rockers claim there’s another operating limestone mine nearby, and TVA’s right to flood needs a once-in-a-century storm, so no biggie).

And Judge Scholar Al hews to the ancient line. “The value of property is a question of fact. On a motion for summary judgment, ‘any evaluation of [an appraisal’s] accuracy is irrelevant for purposes of deciding whether the appraisal is qualified.’ It may well be that [trusty appraiser]’s methodology ‘was sloppy or inaccurate, or haphazardly applied,’ but that is not dispositive in determining whether petitioner satisfied the reporting requirements of section 1.170A-13(c)(3). At bottom, respondent is challenging the reliability and accuracy of [trusty appraiser]’s methodology and specific basis of valuation. This dispute must be resolved at trial, not on a motion for summary judgment.” Order, at p. 5. (Footnote and citations omitted).

As long as the appraisal covers the right land, everything else is for trial.

GO FIGURE – PART DEUX

In Uncategorized on 08/09/2022 at 21:08

Yesterday this my blog had 77 (count ’em, 77) views. I had noted a rather interesting order from ex-Ch J L Paige (“Iron Fist”) Marvel, involving IRS counsel trying a weasel-worthy end-run around settled Tax Court precedent.

Today I found nothing worthy of a blogpost. Nonetheless, this my blog has so far attained 80 views.

See my blogpost “Go Figure,” 10/21/16.

Like the well-known Scotch, some things never change.

SIR EDDIE ELGAR AND 4868

In Uncategorized on 08/08/2022 at 15:21

When you send a check with a Form 4868, facts-and-circumstances still head the payment-vs-deposit playlist, so Sir Eddie Elgar needs to write an appropriate march. IRS wants everything sent in with a Form 4868 to be a payment, but ex-Ch J L Paige (“Iron Fist”) Marvel won’t go there. No reason to overrule long-standing precedent, despite some CCA mutterings to the contrary.

Daniel Serfaty, Docket No. 3673-19, filed 8/8/22, is a wee bit casual about filing and paying. After Daniel paid estimateds for year-at-issue (all statutorily deemed paid as of April 15), his trusty CPA sent in a Form 4868 with another $110K, showing an estimated tax due greater than what the late-filed final return showed. Meantime, IRS hit Daniel with a SFR and a SNOD, which Daniel petitioned, but IRS folded when they got the late-filed return. So Daniel owes nothing.

Except Daniel wants his $110K back, as the estimateds plus some withholding covered his agreed-upon tax bill.

IRS is trying for one-size-fits-all solutions, like Mandy Mobley Li  wiping out whstleblowing. Here, they want everything accompanying a 4868 to start the three-year Section 6511 lookback.

The law has been that whether a remittance to IRS is a payment or a deposit depends upon facts and circumstances, chiefest of which is whether a written statement accompanied the remittance, stating that it is a deposit. Deposits are refundable on demand if not applied to assessed tax. Some CCAs have said otherwise, but Daniel is Golsenized to 1 Cr, and they haven’t.

“A taxpayer’s intent to have his remittance treated as a deposits established by all of the relevant facts and circumstances. A disorderly or random remittance—one made by a taxpayer ‘arbitrarily, without regard to an orderly, apparent, or reasonably possible ultimate tax liability, and that is made prior to any determination by [the Commissioner] of the taxpayer’s tax liability’—will generally be regarded as a deposit. By contrast, a remittance is not random and is generally considered a payment when the taxpayer makes the remittance voluntarily based on a bona fide estimate of an uncontested tax liability. In order to obtain an extension of time to file, a taxpayer must show ‘the full amount properly estimated as tax’ on his Form 4868 application. Treas. Reg. § 1.6081-4(b)(4). Although a taxpayer is not required to make a payment of the amount estimated in order to obtain an extension of time to file, cf. Treas. Reg. § 1.6081-4(b), an extension of time to file does not operate as an extension of time to pay. Treas. Reg. § 1.6081-4(c).

“Petitioner, through his accountant, made a voluntary remittance of an amount that he represented on his Form 4868 to be his estimated income tax liability… and he did so without making any statement indicating that the remittance was intended to be a deposit with respect to his … federal income tax liability. See § 6603. Under these facts, we have no trouble concluding that the remittance was not random. The mere fact that petitioner’s estimate was inaccurate does not change that. Indeed, demanding precise calculations of tax on Forms 4868 would obviate the need for taxpayers to request such extensions.” Order, at p. 6. (Citations omitted).

Sure there can be deposits. “Additionally, although no regulations have been promulgated under section 6603 to provide definitive guidance on the exclusive means by which a taxpayer may make a deposit, guidance from the Commissioner indicates that a taxpayer intending to make a deposit may do so by attaching a written statement to that effect to his remittance. Rev. Proc. 2005-18, 2005-13 I.R.B. 798.” Order, at p. 7.

Neither Daniel nor trusty CPA breathed Word One about the $110K being a deposit, and IRS promptly applied it to Daniel’s account. Daniel waited five (count ’em, five) years to claim the $110K was a deposit. So no factual dispute, and IRS gets to keep Daniel’s $110K.

Takeaway (if you need one): Write “DEPOSIT” on check, 4868, and send accompanying billet doux similarly endorsed.

CLEANING UP THE SILT

In Uncategorized on 08/05/2022 at 19:14

I guess STJ Eunkyong (“N’Yawk”) Choi’s appointment on 12/6/21 was a step just behind STJ Adam B (“Sport”) Landy’s, making her the most junior member of the Tax Court Bench. So she gets what we used to call the S details.

If you must, see my blogpost “Michael Corleone at the Silt Stir,” 8/4/22.

Today, STJ N’Yawk Choi has three (count ’em, three) more CDPs with defective Boss Hossery, namely, viz., and to wit, Vance Finance and Holding Corporation, Docket No. 23761-16L, Day Stores, Inc., Docket No. 22860-16L, and Seashore Broadcasting Corporation, Docket No. 5511-18L, all filed 8/5/22.

These look like the Midco type give-and-go, sale of corp with assets worth a ton and basis of bortscht (please pardon obscure technical term) to a shill, which tries a phony dodge to bury the gain when the tax is due. I’ve blogged many such, and in these IRS makes much of transferee liability in tossing the broad-scope OICs at issue.

IRS gets summary J for the NFTLs and NITLs here, and the tossed OICs, but strikes out on Boss Hossery. Straight Michael Corleone classical gambit.

I already cited, in my above-named blogpost, to Judge Holmes’ prescient remarks about Boss Hossery. But here’s the grandpappy of them all; see my blogpost “The Great Dissenter,” 12/28/11. “(T)he silt we stir today will cloud the cases we plunge into tomorrow.”

And STJ N’Yawk Choi looks to be the one selected to clean up the silt.

REMAND AND RETREAT

In Uncategorized on 08/04/2022 at 16:01

Judge Emin (“Eminent”) Toro remands again Whistleblower 769-16W, 159 T. C. 2, filed 8/4/22, back to the Ogden Sunseteers (how nice they have something to do post-Li). But he won’t retain jurisdiction.

Both 769-16 and IRS want the remand, because “‘[t]he pending IRS actions against the target taxpayers are not interdependent, and the actions may become final at different times and involve different levels of contribution from the Petitioner’s information, if it is considered.’ Therefore, ‘it may be appropriate for the Whistleblower Office upon remand to issue a separate determination relating to each [target] taxpayer.’ In addition, ‘[t]he timeline for the resolution of any IRS actions against the [target] taxpayers cannot be known at present, nor is that timing under the control of the Whistleblower Office.’ And ‘[t]he Whistleblower Office must wait until the outcome of the IRS actions before the Whistleblower Office can evaluate the contribution, if any, of the Petitioner’s information, and cannot make any determination until there is a final determination of tax.'” 159 T. C. 2, at pp. 2-3.

But there never yet was a remand to the OS where the Tax Court judge did not retain jurisdiction. And the IRS and 769-16 can’t agree to give Tax Court powers it doesn’t have. But trust Judge Eminent to find a way.

“Nothing in section 7623(b) precludes us from proceeding as the parties request, and we see no other reason for declining their invitation in the circumstances here.” 159 T. C. 2, at p. 3.

Tax Court acts like an appellate court when it reviews whistleblower cases; appellate courts very rarely retain jurisdiction, unless an administrative agency is unusually obstreperous or contumacious. And the Ogden Sunseteers are docile to a fault.

True, three (count ’em, three) years ago, ex-Ch J Michael B (“Iron Mike”) Thornton retained jurisdiction when he remanded 769-16. See my blogpost “Anyone Can Whistle – And Get Remanded,” 4/11/19. But now, with an open-ended timeline beyond the parties’ control, that serves no purpose.

“Finally, proceedings under section 7623 differ from those under section 6330, which governs hearings concerning proposed levies.  Section 6330(b)(2) contemplates that ‘[a] person shall be entitled to only one hearing under this section with respect to the taxable period to which the unpaid tax . . . relates.’ That statutory text counsels in favor of our retaining jurisdiction with respect to any remand for a supplemental hearing in cases under section 6330. Doing so permits us to review the entire hearing (as supplemented) once the remand is complete and avoids any disputes about compliance with the section 6330(b)(2) restriction as well as any potential prejudice to a taxpayer seeking our review. By contrast, nothing in section 7623(b) contemplates that a whistleblower is limited to one proceeding before the Whistleblower Office. Thus, our declining to retain jurisdiction during a remand here, at the request of the parties and after vacating the Whistleblower Office’s prior determinations, neither departs from the statute nor prejudices a whistleblower in Petitioner’s circumstances.” 159 T. C. 2, at pp. 5-6.

So 769-16 may be furnishing forth much future blogfodder, to make up for all the tossed post-Li gang.

MICHAEL CORLEONE AT THE SILT-STIR

In Uncategorized on 08/04/2022 at 11:58

STJ Eunkyong (“N’Yawk”) Choi has IRS playing the Michael Corleone classical gambit to counter the silt-stirring attack on Boss Hossery from Humboldt Shelby Holding Corp., Docket No. 23763-16L, filed 8/4/22.

This long-running saga from immunologist James (“Little Jim”) Haber has been here before. Today’s disputation involves the Section 6662 chops assessed long ago and unchallenged in the deficiency proceedings which preceded the NITL and NFTL here, and the rejected OIC.

IRS wins summary J on the OIC bounce. COIC needn’t negotiate with offrerors, and letting these shelterjammers off with a grand would encourage others.

But the Boss Hossery challenge isn’t to the underlying liability. It’s a stand-alone requirement, a hapax legomenon. See my blogpost “Stir, Baby, Stir – That Silt,” 12-20/17. And verification of proper compliance is required by Section 6330(c)(1). See Order, at pp. 5-6.

Once again the Genius Baristas have posted the order in PDF, so I cannot copy-and-paste from it here.

IRS never showed proper Section 6751(b) compliance at any stage, so no summary J on the chops. Probably they’ll never be collected; looks like the tax itself is also a lost cause.

NADA

In Uncategorized on 08/03/2022 at 16:03

Neither opinion nor order worthy of comment today. I won’t waste your time.

“DISSION”

In Uncategorized on 08/02/2022 at 15:28

Your attention is respectfully directed to my blogpost “A Rant,” 3/7/13. I see some 574 orders on the Tax Court website thus far today, of which 250 are standing small-claimers. I imagine not a few of the recipients thereof will do as Noël Coward suggested is done in Bangkok at twelve o’clock. The rest will hover in some sort of limbo.

Remember we had some 35,000 petitions filed in CY 2021. Also, in that same period, my source tells me we had 24 full-dress T. C.s,  145 T. C. Memos., and 42 T. C. Sum Ops. My ultra-sophisticated readers need not tell me that cases were disposed of via off-the-benchers, stip-outs, and dispositive orders (summary J, no jurisdiction, no pay, claim preclusion). I have no tally of those, and I daresay no one else does, either. But let me know if I’m wrong.

Meantime, petitioners are still waiting for their “dission.”

HUMAN OR INHUMAN?

In Uncategorized on 08/01/2022 at 11:14

Another of Judge David Gustafson’s conundrums is found in Rock Creek Property Holdings, LLC, Rock Creek Land Manager, LLC, Tax Matters Partner, Docket No. 5599-17, filed 8/1/22. Tax Court is one of those rare venues where a non-human can proceed without counsel; Rule 24(b) lets corporations, trusts, estates, and unincorporated associations pick a fiduciary, officer, or authorized individual to appear and litigate in Tax Court, whether admitted to practice or not.

But LLCs (limited liability companies), creatures of State statutes, never got mentioned in Rule 24(b), and ex-Ch J Maurice B (“Mighty Mo”) Foley didn’t fill the gap when he proposed Rules changes back in March.

The Rockers’ trusty attorney wants to bail, but who will “take up our quarrel with the foe”?

Judge Gustafson to the rescue. “Rule 24(b)(1) does not explicitly mention a ‘limited liability company’, but we construe the rule’s allowance to extend to an LLC. That is, we will allow Manager to continue to prosecute this case without counsel.” Order, at p. 2.

But Manager, the Rockers’ TMP under the now-repealed TEFRA régime, is inhuman; it’s another LLC.

Since trusty attorney filed the petition, no individual was designated to act for Manager, thus Rule 24(b)(2)(B) is off the menu.

Judge Gustafson again does the Gordian knot number.

“The case proceeded with counsel, but now counsel proposes to withdraw. Rule 24(c)(4) requires that ‘[a]ny motion to withdraw as counsel or to withdraw counsel must also include the party’s then-current mailing address, email address (if any), and telephone number.’ Paragraph 8 of Mr. [trusty attorney’s] motion acknowledges Rule 24(c)(4)(B); and as ‘[t]he TMP’s current mailing address’ the motion gives ‘Rock Creek, LLC, c/o Dwayne P. (Pete) Davis . . . .’ The motion does not state Mr. Davis’s relation to Manager, nor (assuming he is the human person who will appear) the capacity in which he will be appearing (whether officer, member, or something else).” Order, at p. 2.

So let trusty attorney dish on the individual who will appear for Manager: name, mailing address, e-mail (if any; but who in the 21st Century doesn’t have e-mail? Maybe another Rule change should require litigants to get e-mail), telephone number, and capacity In which appearing (member, manager, assignee, Bankruptcy trustee, receiver, creditor, casual bystander).

A good practice tip from Judge Gustafson.