Archive for the ‘Uncategorized’ Category


In Uncategorized on 12/03/2021 at 12:25

While the United States of America has no official language (despite various attempts to legislate one), and while the question whether there should be such a one has great political philippic potential, nevertheless and notwithstanding, the United States Tax Court conducts its proceedings in English. See Administrative Order 2020-02, 5/29/20, which provided, in pertinent part: “All Court proceedings are conducted in English. All documents must be filed in English or include a certified English translation. You should let the Judge know as early as possible that you require help with English. It is generally the responsibility of each petitioner to bring an interpreter. If you give advance notice, the Court may have one available.”

However, this Admin Order was terminated by Administrative Order 2021-01, 8/27/21, which omits the above cited language.

My readers will doubtless recall Judge Albert G (“Scholar Al”) Lauber dealing with German in my blogpost “The German Invasion,” 9/17/20; Judge Elizabeth A (“Tex”) Copeland dealing with Spanish in my blogpost “LITC and VITA,” 8/20/19; and Judge Mark V Holmes being bemused as the Golden Gophers’ interpreter tries to translate “negative amortization” into Oromo, which is “an Afro-Asiatic language, of the Cushitic branch, and is the most widely spoken language in Ethiopia.” For that gem, see my blogpost “The Golden Gophers Win One,” 5/6/14.

Be all the foregoing as it may, Ch J Maurice B (“Mighty Mo”) Foley eschews the role of polyglot in Justino Hernandez Larios & Teresa Salazar Barranco, Docket No. 18751-21, filed 12/3/21*.

Justino & Teresa filed “an imperfect petition written entirely in Spanish. Petitioners did not attach a Notice of Deficiency to the Petition.” Order, at p. 1.

Ch J Mighty Mo tells them to amend in English, concisely and clearly setting forth assignments of error and facts in support of each thereof. And send in the sixty bucks.

Think maybe so it might could be time for a Rule about languages, Ch J?

*Justino Larios & Teresa Barranco Docket No 18751-21 12 3 21


In Uncategorized on 12/02/2021 at 15:33

This time it’s not the petitioner who plays the game, but his daughter, who files MFJ with estranged spouse (to whom she’s still married, although living apart). The petitioner meanwhile files HOH and for child tax credit, dependencies, and EITC for his minor grandchildren, whom he supports and who live with him for the requisite.

His trusty attorney claims IRS foot-faulted by not pleading as an affirmative defense the MFJ filed by daughter and spouse for year at issue, taking the grandkids as dependents, etc. But STJ Peter (“HB”) Panuthos rejects that in a footnote to a Section 7491(c) BoP shift.

Here’s the footnote in Nowran Gopi, 2021 T. C. Sum. Op. 41*, filed 12/2/21, at p. 6, footnote 4,

“In the alternative petitioner asserts that respondent bears the burden of proof in this matter because respondent’s determination was based upon the production of a [year at issue] joint tax return filed by petitioner’s daughter and her husband. Petitioner claims that the production of said tax return constitutes an affirmative defense under Rules 39 and 142(a). Rule 39 describes the pleading of special matters. The introduction into evidence of Ms. K and Mr. E’s [year at issue] joint tax return is not a special matter and does not constitute an affirmative defense.” (Names omitted).

Gowran never claimed Ms. K wasn’t married to Mr. E, nor that their return for year at issue was invalid. Whatever their domestic problems, apparently they were married and did take Gowran’s grandchildren on their 1040 MFJ.

I do think that IRS should have pled K and E’s 1040 MFJ. Rule 39 is more expansive than STJ Panuthos states here. But this is a small-claimer, where the Rules are relaxed both ways.

Note IRS folded the Section 6662(a) chop. This saves STJ Panuthos from deciding whether Gowran’s lack of knowledge of K’s marriage and MFJ filing would give him a good faith win on the chops. It’s an interesting question, but perhaps resolution should await a fully-briefed bigtime case.

*Nowran Gopi 2021 T C Sum Op 41 12 2 21


In Uncategorized on 12/02/2021 at 12:02

When CSTJ Lewis (“Spelled Right”) Carluzzo issues an invitation, it’s well to heed it. While he may not be able to give recusants the Luke 14:23 treatment, it may yet be unpleasant to say “no.”

CSTJ Lew extends the invitation to Nivaldo Souza & Ivonete Souza, Docket No. 32006-21*, filed 12/2/21, after tossing their petition for failure to state a claim.

“Petitioners’ attention is invited to I.R.C. section 6673(a). If it appears to the Court that a taxpayer’s position in a proceeding before the Court is frivolous or groundless, then the Court can impose a penalty (not to exceed $25,000) on that taxpayer.” Order, at p. 1.

And it’s beginning to look a lot like frivolity to CSTJ Lew.

No chop today, but heed the invitation.

*Nivaldo and Ivonette Souza Docket No 32006-21 12 2 21


In Uncategorized on 12/02/2021 at 10:58

See my blogpost “The Proofreader’s Reward,” 2/16/16, for a prelude to this aubade.

That irrepressible couple, Gregory J. Podlucky & Karla S. Podlucky, Docket No. 453-17, filed 12/2/21* (a plethora of palindromes this week), are back again. Notwithstanding Karla’s Van Cleef & Arpels custom-made baubles and Greg’s $4 million-plus in unpaid tax and chops (see my blogpost “The Woman in the Case,” 10/21/21), Greg & Karla plead poverty.

And big-hearted Judge Albert G (“Scholar Al”) Lauber bought their tale of destitution.

“On October 20, 2021, petitioners filed a motion requesting that the Court pay the cost of securing for them a transcript of the trial, alleging that they lacked the funds necessary to pay the cost. We granted that motion on October 29, 2021. The trial transcript, consisting of 457 pages, was posted to the docket record of this case on November 3, 2021.” Order, at p. 1.

While I’m usually genial at this season of anticipation, I note that, although “the Court” wrote the check, the US taxpayers, of whom I am one, paid the cost of the transcript. I’d like to see for myself just how broke Greg & Karla are.

OK, so what’s done is done. But that doesn’t stop Greg & Karla from going for it on fourth down.

“…petitioners filed a Motion for Audio of Trial Proceedings, requesting that the Court ‘pay the cost of the duplicating of the video and audio’ of the trial. As grounds therefor they note that the transcript (which they admit having received) includes instances where two speakers spoke concurrently, as indicated by brackets containing the words ‘indiscernible, simultaneous speech.’ Petitioners assert that the transcript for this reason ‘is not indicative of the trial proceedings,’ risking violation of their ‘Fifth Amendment right to due process.’ Order, at pp. 1-2.

Judge Scholar Al, courteous as always but finally out of patience, denies. In 457 (count ’em, 457, and Judge Scholar Al clearly has) pages, Judge Scholar Al finds “relatively few” instances where the reporter had to note talkovers, and those only for a line or two. None “detracts even slightly” from comprehensibility, Order, at p. 2.

So Judge Scholar Al gives counsel and petitioners a conversation easement: they can talk over each other, provided the meaning stays clear.

Anyway, if the transcript is unclear or erroneous, parties can move to correct, although Judge Scholar Al does not cite Rule 85(e). The Rules’ proclivity for motions seems to me excessive in this case. Our New York Civil Practice Law and Rule 3116(a) requires the deposed to note their objections and corrections in writing at the end of the transcript, and sign and return the same.

Much simpler.

*Gregory & Karla Podlucky, Docket No 453-17 12 2 21


In Uncategorized on 12/01/2021 at 16:39

I’ve often blogged about petitioners losing their small claimer status (the S suffix on the docket no.) when they cross the $50K line, despite fighting to keep it. But today Hong Jun Chan and Suzhen Mei, 2021 T.C. Memo. 136*, filed 12/1/21, claim they filed Forms 1120 in two (count ’em, two) consecutive years, so the S Corp election they filed for Younique Café, Inc., is gone. Hence, Younique plays no role in their individual tax status, as it’s a separate taxpayer.

Except Judge Albert G (“Scholar Al”) Lauber says that isn’t how you do it.

“Once an entity elects S corporation status, the election is effective ‘for all succeeding taxable years.’ Sec. 1362(c); see Mourad, 121 T.C. at 4 (‘An election to be an S corporation continues until terminated.’). The election will be terminated if and only if (1) the shareholders make an affirmative revocation, (2) the entity ceases to be a ‘small business corporation,’ or (3) the entity’s passive investment income exceeds 25% of its total gross receipts for the previous three years. See sec. 1362(d). Petitioners do not allege that any terminating event occurred during [years it issue] (or previously). They thus have no basis to dispute that YCI was an S corporation during [years at issue]. As a shareholder of YCI, petitioner husband is taxed on a pro rata basis. See sec. 1366(a)(1)(A).” 2021 T. C. Memo. 136, at pp. 9-10.

Hong Jun and Suzhen filed 1040 MFJs for the years at issue, but never mentioned Younique. IRS subpoenaed bank records, and found an aggregate of $1.9 million in taxable deposits. Hong Jun and Suzhen proffer professionally-prepared but undated 1120s, with no evidence that these were ever sent to IRS. And IRS says their records show Younique never filed nuthin’. So, says IRS, it all belongs to Hong Jun and Suzhen.

But the SNOD here is problematic. IRS wants to stick Hong Jun with the whole gross income, or in the alternative do a community-property split between Hong Jun and Suzhen. The problem is, the 2553 shows Hong Jun owned 40% of Younique’s stock, but the remainder is split 30% and 30% between two unnamed nonparties.

Howbeit, the 1120s do show expenses, and Hong Jun claims Younique lost money and subsequently cratered.

IRS wants summary J on the tax status of Younique as an S Corp (granted), and on the deficiencies, add-ons, and chops (denied).

“Proceeding pro se, petitioners in their petition did not dispute the RA’s numbers. But the Forms 1120 attached to their responses show different revenue figures for YCI (on a fiscal year basis). The RA allocated 100% of YCI’s gross income to petitioner husband, but the Form 2553 shows him as owning only 40% of YCI’s shares. There is no evidence in the current record to show that the ownership interests changed. Taking these facts together, and making allowances for petitioners’ pro se status, we conclude that the determination of YCI’s gross income for [years at issue] (and petitioners’ pro rata shares of its income) should be reserved for further proceedings.

“The RA allowed no deductions for cost of goods sold or the expenses incurred in operating the restaurant. The burden of proving entitlement to deductions and credits is on petitioners. See Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). The Forms 1120 attached to their responses allege that YCI incurred significant costs for (among other things) food, rent, wages, and utilities, allegedly generating losses for both years. It is obvious that the restaurant incurred expenses, and we think petitioners should have the opportunity to prove what they were. Their liability for a penalty for [Year One] and for additions to tax for [Year Two] likewise raises factual questions.” 2021 T. C. Memo. 136, at p. 12.

Business operating numbers rarely make good grist for the summary J mill.

*Hong Jun Chan and Suzhen Mei 2021 T C Memo 136 12 1 21


In Uncategorized on 12/01/2021 at 15:54

Except When It Isn’t

Judge Elizabeth A (“Tex”) Copeland delivers that message to Anjali Soni, who trusted, still trusts, and will trust, her husband with all financial and tax matters. Anjali wouldn’t even sign a tax return, or any other paper, lest it be a divorce paper; if that sounds contradictory, well, that’s how Anjali was brought up in her subcontinental homeland.

This is a tacit consent case, although Judge Tex Copeland never uses the word. The issue here is joint-and-several; was there a joint return, and a joint designation of a representative?

Judge Tex Copeland finds Anjali gets all the consequences of a decade of utter passivity in Om P. Soni & Anjali Soni, 2021 T. C. Memo. 137*, filed 12/1/21. But it’s not a Happy Palindrome Day for Om and Anjali. Their $1.1 million Sub S loss founders for want of provable basis, Om (a highly-credentialed businessman) admitting that he “… was aware that he should have kept records of the [Sub S] and admitted that he did not keep proper records of this transaction. In correspondence with respondent Om indicated that the [Sub S] transactions were ‘based on trust and not properly documented the way a normal business transaction would be.’ No documents were produced at trial.” 2021 T. C. Memo. 137, at pp. 39-40.

Om and Anjali tried SOL, and there was a bunch Forms 872 (hi, Judge Holmes) over the decade that IRS and the Sonis were backing-and-forthing. Om and Anjali claim their trusty CPA forged their signatures on POAs and 872s, but waited for the trial to say so. A wee bit late, says Judge Tex Copeland.

Anjali claims she never filed nuthin’ and signed nuthin’, but she knew there were taxes and led a comfortable life, ignoring the mail she picked up almost every day, even when addressed both to her and to Om from the IRS. Lack of action, with knowledge, constitutes consent. Refusing to sign while accepting benefits and saying nothing constitutes consent. Anjali should have heeded a former US President: “Trust, but verify.”

When IRS gets involved, ignorance stops being bliss.

*Om P Soni and Anjali Soni 2021 T C Memo 137 12 1 21




In Uncategorized on 11/30/2021 at 18:23

I have often heard the motto of the Great Chieftain of The Jersey Boys: “Not to punish, but to bring into compliance.” The voluntary assessment system requires voluntary compliance. Hence Appeals’ rejection of an OIC or a PPIA, either of which would yield all that IRS might reasonably hope to collect, is not arbitrary or capricious, if acceptance would not be “in the best interest of the Government. See IRM pt. (Dec. 20, 2018); cf. IRM pt. 10, 2011).” James R. O’Donnell, 2021 T. C. Memo. 134*, filed 11/30/21, at p. 12.

Seems that Jim had run up a tax tab north of $2 million, with add-ons, chops, and interest. And hadn’t bothered filing for nigh on twenty (count ’em, twenty) years. Of course, with his insurance and financial business licenses revoked, Jim claims the $280K he put in his OIC is the best he can do, and the $2K per month PPIA the SO offered him didn’t take all his expenses into account.

As to the latter, Judge Albert G (“Scholar Al”) Lauber says that number was based on Jim’s numbers, and if Jim was unhappy he had a chance to say so. But remember, Appeals doesn’t have to negotiate; as the bridge players say, lead with your longest and strongest.

As to Jim’s OIC, “'[O]ffers may be rejected on the basis of public policy if acceptance might in any way be detrimental to the interests of fair tax administration, even though it is shown conclusively that the amount offered is greater than could be collected by any other means.” See IRM pt. Because reports of accepted OICs are publicly available, see sec. 6103(k)(1), the IRS may reject an OIC if it determines that the ‘public reaction to the acceptance of the offer could be so negative as to diminish future voluntary compliance,’ see IRM pt.

“For two decades (if not longer) petitioner failed to file returns and failed to pay the tax shown on SFRs that the IRS prepared for him. During this period he was evidently a successful practitioner in the insurance and finance business. As of 2016 his outstanding liabilities exceeded $2 million, and he offered to pay only a small fraction of these liabilities. Because of his lengthy history of ignoring his tax obligations, the Appeals Office determined that acceptance of his offer could be viewed as condoning his ‘blatant disregard for voluntary compliance’ and that negative public reaction to acceptance of his offer could lead to ‘diminish[ed] future voluntary compliance’ by other taxpayers.” 2021 T. C. Memo. 134, at pp. 12-13.

As The Great Chieftain has said.

*James R O’Donnell 2021 T C Memo 134 11 30 21


In Uncategorized on 11/30/2021 at 17:14

No Chop

I’m sure my readers remember Plateau Holdings, LLC, Waterfall Development Manager, LLC, Tax Matters Partner, 2021 T. C. Memo. 133*, filed 11/30/21. The Plateaus $25.4 million conservation easement was vaporized a year ago last June in 2020 T. C. Memo. 93. See my blogpost “Extinguished and Overvalued,” 6/23/20. But you’ll also remember that the figure of $2.6 million would have been the right number, had not the “highly contestable reading of what it means to be perpetual” (hi, Judge Holmes) been invoked. Judge Albert G (“Scholar Al”) Lauber, nowise loath to lay the 40% overvaluation chop on the $22.7 million highball, still wondered about the 20% overstatement chop on the $2.6 million.

Well, the Plateaus slide under the tag. “Gude faith, he maunna’ fa’ that,” as Scotland’s Greatest put it.

I can’t do better than to quote Judge Scholar Al.

“The easement deeds were prepared by Mark J, an attorney for the donee, Foothills Land Conservancy (Conservancy). Both Mr. J and the Conservancy had considerable experience in drafting easement deeds, and the deeds in this case were modeled after others shared through an alliance of land trusts. Although Mr. J was not Plateau’s lawyer, Plateau could reasonably have believed that he drafted the easements in a manner that was intended to comply with the regulations and to protect the Conservancy’s interests.

“When Plateau filed its 2012 return, the validity of such judicial extinguishment clauses had not been tested in litigation. All of the judicial opinions that have found such clauses wanting were issued well after Plateau executed the deeds (in December 2012) and filed its return (in April 2013).” 2021 T. C. Memo. 133, at pp. 5-6. (Name omitted).

All the improvements-out-on-extinguishment cases came down thereafter.

“The information available to Mr. J and Plateau in December 2012 arguably supported the acceptability of judicial extinguishment clauses resembling those here. In 2008 the IRS had issued a private letter ruling (PLR) suggesting that a clause of this sort would not necessarily prevent the allowance of a charitable contribution deduction. See Priv. Ltr. Rul. 200836014 (Sept. 5, 2008) (discussing an easement deed that reduced the donee’s proceeds by the value of the donor’s permissible improvements). The record in this case does not show that anyone associated with Plateau subjectively relied on this PLR when executing the easement deeds or preparing its 2012 partnership return. But the PLR does provide some objective support for the reasonableness of Plateau’s position. See Sells v. Commissioner, T.C. Memo. 2021-12, at *37-*40; Oakbrook Land Holdings, 119 T.C.M. (CCH) at 1361; sec. 1.6662-4(d)(3)(iii), Income Tax Regs. (stating that PLRs may constitute ‘authority’ in determining whether the taxpayer has ‘substantial authority’ for its return position).” 2021 T. C. Memo.  133, at pp. 6-7.

No 20% chop for the lower tranche.

OK, so as was known before now, these deeds were not all concocted by dodgefloggers. There were and are honest conservators of the environment, and Congress intended to encourage such as they. True, the gameplayers, dodgers, wits, wags, and wiseacres descended vulture-wise, combining dirt-cheap dirt with poosh-’em-up appraisals, to try to loot the fisc.

But as Judge Holmes and I have said, the hang-’em-all approach hangs the innocent as well as the guilty, using “highly-contestable readings of what it means to be perpetual.”

I hope I hardly need aver that I am no fan of dodgers and gameplayers. The façadefakers were brought down by their phony appraisals, when the local landmarks laws did not show the easements to be illusory. Same here.

*Plateau Holdings LLC 2021 T C Memo 133 11 30 21


In Uncategorized on 11/30/2021 at 16:21

Judge Elizabeth A (“Tex”) Copeland needs all her extensive tax expertise to unravel the tax dodge set up in FAB Holdings, LLC, 2021 T. C. Memo. 135, filed 11/30/21*. Both IRS and the FAB attorneys go astray at one point or another. FAB, though an LLC, is taxed as a C Corp, and another LLC is box-checked as a partnership, both of which were named by Frank Berritto, whose initials adorn Holdings and who named the partnership LLC. Apparently, that and funding the partnership LLC was enough. “… while Mr. A advised Mr. Berritto on the [tax plan], Mr. Berritto also participated in planning the structure.” 2021 T. C. Memo. 135, at p. 20. (Footnote omitted, but read it; it says Mr Berritto decided to call the C Corp after himself.)(Name omitted).

Mr Berritto hired Mr A. to devise the plan, but only paid him for his services; no evidence that Mr A was a dodgeflogger, hawking his sordid wares to the public. When Mr Berritto tries to disqualify Mr A as representative who extended the SOL via a bunch Forms 872 (hi, Judge Holmes) for conflict of interest, Judge Tex Copeland isn’t buying.

“Under petitioners’ proposed conflict of interest standard, taxpayers who paid a tax preparer or an attorney as their representative could not have the preparer or attorney represent them before the IRS (or in a judicial proceeding) arising out of the transaction for which the preparer or attorney was paid. However, taxpayers often select the firm or person who planned the transaction to be their representative before the IRS in a subsequent inquiry. Petitioners sought Mr. A’s expertise for tax planning and preparation. Mr. A provided tax planning services to the Berrittos but also prepared yearly returns for them, FAB, and Enterprises. Petitioners paid Mr. A around $20,000 for these services. … these cases reveal no evidence that Mr. A was under criminal investigation with a propensity to cooperate with the IRS. The act of charging for services is not a criminal activity. Nothing in the record indicates that Mr. A’s extending the assessment limitations periods involved an inherent conflict of interest. Furthermore, … while Mr. A signed all of the Forms 872 for the Berrittos’ individual returns and most of FAB’s Forms 872, Mr. Berritto personally signed the first Form 872 for FAB.” 2021 T. C. Memo. 135, at pp. 22-23.

Mr Berritto’s trusty attorneys argue Circular 230 Sec. 10.29(a)(2) define Mr. A’s conflict of interest. But that would disqualify any paid preparer, representative, EA, CPA, or attorney from representing a taxpayer if they had anything to do with the matter at issue. “Such a standard would invalidate the representation of taxpayers by numerous attorneys, accountants, and power of attorney holders because those individuals often perform tax planning and tax preparation and subsequently represent their clients before the IRS. There will always be an underlying monetary tug between clients and their paid representatives. Circular 230 is a mechanism to allow sanctions for violating the regulations governing practice before the IRS; it is not a mechanism to determine whether a power of attorney is valid and confers authority to sign Forms 872. 31 C.F.R. sec. 10.0(a).” 2021 T. C. Memo. 135, at pp. 23-24.

The late Mrs. Berritto was in this deal before she became the late Mrs. Berritto. However, IRS folds all the deficiencies and chops against the late Mrs Berritto for the years for which Mr A signed Forms 872 after her death. Though she and Mr Berritto filed MFJ, she and he are separate taxpayers, and only she or her ex’r could bind her. POAs are not testamentary substitutes; they die with the principal.

As for Mr. A’s contraption, it was the usual income-assignment roundy-round.

You can tell Judge Tex Copeland served in the trenches before ascending the bench. “There will always be an underlying monetary tug between clients and their paid representatives.” Judge, you definitely got that right.

*FAB Holdings LLC 2021 T C Memo 135 11 30 21


In Uncategorized on 11/30/2021 at 11:56

The Genius Baristas Are On It

Ch J Maurice B (“Mighty Mo”) Foley has an arduous and often-unrewarded task, cat-herding self-representeds and wayward counsel through the narrow gate into the precincts of 400 Second Street, NW, in the City Non-State. He is often unaided even by the hardlaboring clerks and flailing datestampers within the aforesaid precincts.

But I’m pleased to being him good news: help is at hand. The Genius Baristas and the 18Fs (whoever they are) will save him from the labor occasioned by such as Felicia Nicole Jones, Docket No. 31603-21W, filed 11/30/21*.

I post Felicia, before her order is swept forever from the internet at midnight. Felicia neither provided a copy of a NOD from her denied or rejected blowing, nor ponied up the sixty George small blind. But these are mere details.

Ch J Mighty Mo must school Felicia on Tax Court etiquette.

“The parties are reminded that, under Rule 345(b), Tax Court Rules of Practice and Procedure, when making an unsealed filing with the Court in a whistleblower action, the party making the filing ‘shall refrain from including, or shall take appropriate steps to redact, the name, address, and other identifying information of the taxpayer to whom the claim relates.’ Rule 345(b) further provides that the party ‘filing a document that contains redacted information shall file under seal a reference list that identifies each item of redacted information and specifies an appropriate identifier that uniquely corresponds to each item listed.’” Order, at p. 1.

And Ch J Mighty Mo goes on for a further five (count ’em, five) paragraphs to detail, with exacting particularity, the precise methods whereby Rule 345 is to be honored in th’ observance.

Ch J, even if Felicia complies with your order au pied de la lettre; even if her case reaches the height of a full-dress T. C., with multiple dissents and concurrences and rearguments galore; even if her case is heard en banc by 5 Cir, and reaches the lofty preëminence of the Marble Palace of the Supremes; even if law review authors discompose electrons beyond count, exalting or excoriating her with impenetrable legal gibberish; nevertheless, and notwithstanding anything at variance with or to the contrary of any or all of the foregoing (as my expensive colleagues would say), if even one document among the tens of thousands submitted in this litigation be sealed, the Genius Baristas will erase all traces of Felicia from the Tax Court website.

So be at ease, Your Honor; the Genius Baristas are on the job.

*Felicia Nicole Jones 31603-21 11 30 21