Attorney-at-Law

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OVERPAID IS NOT PAID

In Uncategorized on 05/23/2017 at 17:03

This somewhat cryptic remark is a puzzlement to Paul Niski, 2017 T. C. Sum. Op. 33, filed 5/23/17, and it leads to an unfair result, but such are the anfractuosities of the IRC. And even the taxpayer’s friend, STJ Leyden, can’t help.

The chronology is somewhat muddled, but Paul overpaid some years and underpaid (or didn’t pay) a couple others (hi, Judge Holmes). But he did file and pay late. The arithmetic seems to show Paul would owe little or nothing, except for late filing.

He’s been hit with nonpayment and nonfiling chops, with interest to boot.

Paul says “you had my money.”

IRS says “Overpayments from one year don’t apply to the next, or any other year, unless you seek application or refund within the Section 6511 lookback periods.” In other words, Paul wants refunds, but the SOL on refunds has run.

That Treasury has “the use of monies” is a good argument if the tax had been paid when due, and Treasury held the overpayments. But Paul hadn’t paid when the taxes were due.

“Whether or not the barred claimed overpayments from 2002 and 2006 are characterized as moneys generally in respondent’s hands, they are not considered payments for purposes of calculating the additions to tax.  The Court is bound by the strict terms of the statutory provisions that limit credits or refunds for overpayments to those properly claimed within three years of the date they are paid.  Landry v. Commissioner, 116 T.C. 60, 62-63 (2001); see sec. 6511(b)(2)(A).  As a matter of law amounts paid or deemed paid more than three years before a tax return claiming them is filed cannot reduce or eliminate the additions to tax.  See Mason v. Commissioner, 2001 Tax Ct. Memo LEXIS 75, at *18; Stephenson v. Commissioner, 1995 Tax Ct. Memo LEXIS 35, at *7.” 2017 T. C. Sum. Op. 33, at p. 22.

And see my blogposts “Lookback in Anger,” 11/12/12, and “Lookback in Anger – Part Deux,” 4/15/15.

So even though Paul gets a chance to challenge tax due de novo in this CDP case, he loses.

AN ANSWER IS NOT A MOTION

In Uncategorized on 05/22/2017 at 16:14

Pre-answer motions are a favorite tactic of defendants. I like them too. And the appropriate templates should be kept handy in IRS’s shot locker as well.

Ch J L Paige (“Iron Fist”) Marvel thus reminds IRS’s counsel in Craig D. Kahn, Docket No. 8733-17, filed 5/22/17, a real dull day at The Glasshouse.

Craig is petitioning a SNOD for tax year 2017, which he doesn’t attach to his petition. This isn’t surprising, because unless Craig somehow has a tax year that ended after January 1 but before April of this year, a SNOD for tax year 2017 is an unlikely occurrence.

IRS answers Craig’s petition, claiming no SNOD or NOD. And not a word about a jurisdictional motion to follow.

“The answer was similarly silent regarding any other potential taxable years that might support this proceeding, simply noting that petitioner’s 2017 tax year had not yet closed.” Order, at p. 1.

OK, but where does that leave this case?

Ch J Iron Fist will tell us.

Since the record shows neither a SNOD nor NOD for 2017, and is silent as to any other year, IRS can either make a jurisdictional motion, or show some basis for jurisdiction, with documents annexed.

A pre-answer motion would have saved a lot of trouble.

THE FACTS ARE EVERYTHING

In Uncategorized on 05/20/2017 at 09:17

This lesson was brought home to me so many years ago that I forget what the facts were in that case. But the lesson remains.

I was discussing Muncy, Ertelt and Banister yesterday. See my blogpost “Play It Now, Play It Now, Play It Now,” 5/19/17. I thought Ninth Cir gave Banister a real quick brush-off.

I hadn’t read or blogged Judge Cohen’s opinion, Joseph R. Banister, 2015 T. C. Memo. 10, filed 1/12/15, the opinion Ninth Cir affirmed so tersely. Her discussion about reforming extensions of SOL of even date therewith (as my expensive colleagues would say) was more interesting than Joe’s multiplex misdeeds. See my blogpost “Reformation Symphony,” 1/12/15.

Turns out Joe was an all-round bad dude and top-class rounder. I won’t repeat what Judge Cohen had to say. If I had been on Ninth Cir at the time, Joe would not have fared as well as he did.

Now Leroy Muncy wasn’t in Joe’s league, so maybe he caught a break. Or maybe litigants are somewhat more douce out on the Great Plains than in LaLa Land.

But I suggest we all, bloggers, litigants, attorneys, USTCPs, and even Judges, must “with a joyful mind, bear through life like a torch in flame” the simple rule: The facts are everything.

PLAY IT NOW, PLAY IT NOW, PLAY IT NOW

In Uncategorized on 05/19/2017 at 15:04

I take my text for today’s sermonette (a Friday when nothing much happens at Tax Court) from Neil Diamond’s 1970 serenade to a vinous by-product that has never appeared upon my table (and hopefully never shall).

Here’s the story of Steven L. Ertelt, Docket No. 10739-14L, filed 5/19/17.

Steve wants to play the Leroy Muncy gambit, but ex-Ch J Michael B (“Iron Mike”) Thornton upbraids Steve for waiting too long.

And ex-Ch J Iron Mike throws in a $1K Section 6673 chop for lagniappe.

It seems like only yesterday I mentioned the Leroy Muncy gambit. But it wasn’t; it was the day before yesterday. See my blogpost “Delegati Non Potest Delegare, – Part Deux” 5/17/17.

Steve waited until he had run out the clock on his “I never got the SNOD so I can contest liability de novo” opener. He went the Rule 122 route, but that got bounced. Then there was a remand to Appeals to see if the SNOD was mailed to last known address.

The supplemental NOD said it was. Trial was set, IRS moved for summary J, but that was denied because of issues with the PS3877.

Trial was finally held. Steve wanted another remand, but didn’t get it.

Tax Court sustained IRS.

Steve now wants a vacation, to put in the Muncy Eighth Circuit remand discussed in my above-referenced blogpost.

Too late, Steve. Vacations (Rule 161 or Rule 162 variations) aren’t for coming up with could’a would’a should’a theories. As the title of this blogpost says, play it now, play it now, play it now.

That is, if you can.

“Unlike the taxpayer in Muncy, petitioner did not raise in his pleadings, at trial, or on brief the issue he has raised in these motions. Petitioner’s case was before the Court on a notice of determination concerning collection action and in his amended petition petitioner alleged he never received of [sic] a notice of deficiency for the years in issue and ‘therefore has never had a chance to challenge the liability of the proposed tax.’ At trial and in his brief, petitioner’s only argument was that respondent could not prove that he received the notice of deficiency, not that the notice of deficiency was improperly issued. See Rule 331(b)(4) (‘Any issue not raised in the assignments of error shall be deemed to be conceded.’).

“Moreover, petitioner had multiple opportunities to raise the delegation of authority issue presented in Muncy and he failed to do so. The Eighth Circuit decided Muncy on March 2, 2016, and through and until the date of the decision in this case on March 1, 2017, petitioner filed several documents including an objection to respondent’s motion for summary judgment, a motion to remand, a post-trail [sic] brief, and a motion to reopen the record, in addition to a trial that was held on June 20, 2016.” Order, at p. 5.

Anyway, says ex-Ch J Iron Mike, these delegation arguments are frivolous.

Well, if they’re so frivolous, how come Eighth Cir reversed and remanded in Muncy?

Steve’s problem is that, even if he had timely raised the delegation issue, he’s a Californian, and Ninth Cir blew off that argument in Banister v. Commissioner, T.C. Memo. 2015-10, at *9, aff’d, 664 F. App’x 673 (9th Cir. 2016).

“In Banister, T.C. Memo. 2015-10, at *7, the taxpayer argued, among other things, that the notice of deficiency was invalid because it was not signed by an authorized person; the Court dismissed the taxpayer’s arguments as frivolous and imposed a penalty under section 6673. On November 16, 2016, the Ninth Circuit, Banister, 664 F. App’x 673, affirmed the Court’s decision and imposed an additional penalty under section 6673.” Order, at p. 6.

And of course Steve the Californian is Golsenized to Ninth Cir. Ex-Ch J Iron Mike blows off Eighth Cir’s learning in a footnote. True, Ninth Cir themselves gave Banister the brush-off in a memorandum opinion, of which the Court said “This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.” Banister, at p. 1, footnote 2.

Now ex-Ch J Iron Mike might argue that the Ninth Cir Rule 36-3(c)(ii) “sanctionable conduct” exception lets Banister in. But it’s a really thin twig upon which to hang, compared to what Eighth Cir did in Muncy.

Granted, Steve may be every bit as great an obstructionist as ex-Ch J Iron Mike says he is. And maybe Ninth Cir is right and Eighth Cir is wrong, although why this point should depend on arbitrary lines on a map eludes me. We’re dealing with a national tax code, that affects all American taxpayers, and a lot of people and entities who aren’t Americans or aren’t taxpayers. Is it so much to ask for a forum to interpret one uniform rule, right or wrong, for all the aforementioned? And isn’t Federal tax law sufficiently complex to require disputes thereunder to be appealed to a national bench with the requisite expertise, rather than the multiplex-cinema approach that has served us so ill up to now?

All that said, IRS’ counsel certainly didn’t cover themselves with glory, either.

THE RIGHT PAPER

In Uncategorized on 05/18/2017 at 19:54

The right paper in the hands of ex’r Jeff would have saved the day for Estate of Nancy H. Powell, Deceased, Jeffrey J. Powell, Executor, 148 T. C. 18, filed 5/18/17.

But once again, the power of attorney is useless if it fails to empower the agent to do what is needful.

The late Nancy put $10 million in cash and stock into a limited partnership, in which she had a 99% limited partner’s interest. Judge Halpern is down with ex’r Jeff’s position, that the three-year clawback into the late Nancy’s estate is only the difference between the worth of the cash and stock over the worth of what the late Nancy got for the same, namely the 99% limited partner’s interest.

And the clawback does cover that value, because all the partners, limited and general, could elect to terminate the LP and divvy up the goodies, thus qualifying for Section 2036(a)(2) “possess or enjoy” treatment.

But ex’r Jeff hands the late Nancy’s 99% limited partner’s interest to a charitable lead annuity trust a week before the late Nancy departs this vale of tears. For no consideration.

No one says there wasn’t a power of attorney (springing variety, which springs to life when principal is incompetent), or that the late Nancy wasn’t incompetent a week before she died. Two doctors certified the late Nancy was incompetent.

Problem: CA law requires a grant of explicit authority in the POA to permit the making of gifts by the agent.

Ex’r Jeff claims general authority to deal with principal’s property, but that’s a nonstarter.

See my blogpost “Good Job, Judge Lauber,” 10/14/16.

Takeaway- Draft that POA with utmost care. Especially when you’re under time pressure.

THE LAW OF RETURN

In Uncategorized on 05/18/2017 at 18:21

Go With The Flow, and The Check’s Not the Thing

This blogpost has nothing to do with the immigration or naturalization law in this or any other country.

Rather, the question is, when the SOL is at issue in a passthrough, is it the return of the passer or the return of the receiver that triggers the SOL.

Judge Paris will tell us, in Neil L. Whitesell and Tracy L. Whitesell, 2017 T. C. Memo. 83, filed 5/18/17. It’s Neil’s story.

His Sub Ss kicked off the parade, and IRS hit Neil with a SNOD, to which Neil riposted with an OIC and a check for $3 million, with conditions, which sets up the second of the subtitles hereinabove set forth, as my colleagues with Cadillac health plans would say.

Don’t ask. I just got back from the orthopedic surgeon, and though the knife isn’t on the menu, some minor immobility is.

Well, Judge Paris lays it out.

“This Court has consistently held that the relevant ‘return’ for determining whether the period for assessment has expired under section 6501(a) is that of the taxpayer with respect to whom the Commissioner seeks to determine a deficiency. See Robinson v. Commissioner, 117 T.C. at 313; Lardas v. Commissioner, 99 T.C. 490, 493 (1992) (and cases cited thereat). The Court has reached that conclusion irrespective of whether the adjustment concerned the transactions of another entity or whether that entity was taxable. See Lardas v. Commissioner, 99 T.C. at 493.” 2017 T. C. Memo. 83, at p. 8.

Neil relied upon a now-demolished conflict between Circuits that the Supremes squashed, and Congress double-squashed, twenty-five years ago. Collectors of accounts of ancient battles can check out 2017 T. C. Memo. 83, at pp. 8-10.

Neil claims his $3 million check, which IRS cashed, was an accord and satisfaction, because IRS didn’t bang it back to Neil within 90 days.

Negatory, good buddy, says Judge Paris. The sovereign isn’t bound by State law enactments like the Uniform Commercial Code. And IRS did bang the OIC and check back to Neil in sufficient time to satisfy Judge Paris.

Takeaway- It’s the receiver, not the passer, whose return governs. And an OIC is nothing until IRS blesses it.

ET POURQUOI N’ÉTAIS-TU PAS LÀ, CRILLON?

In Uncategorized on 05/18/2017 at 13:53

Today I echo the famous cry of the great French warrior Louis des Balbes de Berton de Crillon, the bravest of the brave, after the famous reproach of Le Vert Galant.

Turns out Ch J L Paige (“Iron Fist”) Marvel is sending Association for Honest Attorneys, Docket No. 14562-15X, filed 5/18/17, to trial on 9/18/17, in Oklahoma City, and I won’t be there.

I’m hurt.

It’s not like I was ignoring this organization. See my blogpost “Why Didn’t She Ask Me?” 4/20/15.

 

“DELEGATI NON POTEST DELEGARE” – PART DEUX

In Uncategorized on 05/17/2017 at 15:39

The improperly-signed SNOD is an old rounder’s gambit, and Leroy Muncy, dodge-flogger and dodger, played it well. See my blogpost “Delegati Non Potest Delegare,” 5/9/16, where Eighth Cir. vacated Judge Nega’s whang to Leroy’s pate because Judge Nega failed to address the delegation order allowing Janet A. Miller, IRS Technical Services Territory Manager, to sign the SNOD that brought down Leroy.

Well, “We afforded the parties the opportunity to supplement the record on remand.  Accordingly respondent filed with the Court Delegation Order 4-8.” Leroy Muncy, 2017 T. C. Memo. 83, filed 5/17/17, at p. 2.

And, surprise, surprise, “The notice of deficiency was signed on behalf of the Commissioner by Ms. Miller, Technical Services Territory Manager, pursuant to Delegation Order 4-8, set forth in Internal Revenue Manual (IRM) 1.2.43.9 (Feb. 10, 2004).  In the notice respondent calculated petitioner’s total corrected tax liability for each year.  For each of the tax years 2000 through 2002 petitioner’s deficiency amount was his total corrected tax liability.  For each of the tax years 2003 through 2005 respondent reduced petitioner’s total corrected tax liability by the amounts of criminal restitution ordered for that year to come up with the deficiency amount.  On September 30, 2013, respondent made assessments of the restitution in his internal records.  On June 13, 2014, respondent filed a first amendment to answer stating that petitioner’s deficiency for each of the tax years 2003 through 2005 should be petitioner’s total corrected tax liability for that year unreduced by the amount of criminal restitution for that year.” 2017 T. C. Memo. 83, at pp. 7-8.

Apparently Leroy didn’t pay the restitution, so we’re back to the distinction between  “as if” and “as.” See 2017 T. C. Memo. 83 at pp. 15-18 if lexicographical hyper-subtleties float your boat.

At the end of the day, IRS’ numbers are sustained.

But as the curtain falls, Leroy pulls one last dodge. He avoids the Section 6673 frivolity chop.

WENT FOR THE GOLD, GOT SILVER

In Uncategorized on 05/16/2017 at 07:50

No, this is not about athletic prowess. This is yet another instance of imperfectly guided Congressional largesse.

Hear now the story of Xing F. Wang and Kathleen P. Lee, 2017 T. C. Memo. 81, filed 5/15/17. It’s all, or substantially all, Xing’s story, as Kat is aboard only for some SE she got from Xing’s non-corporation.

Xing is a bioengineer with a Ph.D., like my son-in-law the Texan. Only Xing is a fellow of the American Heart Association, because he developed “a multiparameter method of screening for atherosclerosis-related coronary artery disease or stroke.” 2017 T. C.Memo. 81, at p. 3.

Xing took advantage of the controversial Patient Protection and Affordable Health Care Act, specifically that part or portion of which engrafted Section 48D onto the IRC, providing small businesses with the aforesaid largesse if they engaged in qualifying therapeutic discovery projects.

This Xing did with gusto, through an entity employing himself, his engineer wife and their Harvard Ph.D. candidate son. But Xing never incorporated or otherwise manifested the creation of said entity, nor filed Form 1128. But he reported on a fiscal year.

That of course goes down. You don’t get to pick your tax reporting year, unless Treasury blesses same.

Xing doesn’t spend a sufficient part of the largesse in the appropriate year, nor does he amend his MFJ return for that year to reduce his claimed expense deductions by half per Section 48D(e)(2), and recapture excess largesse.

Xing does get to depreciate his car. IRS doesn’t play the Section 274 card, conceding the business use thereof, but not allowing a Section 179 credit because Xing had no gross income from his scientific endeavors.

Xing’s patent amortization, computer and home office deductions evaporate for want of documentation or corroboration. His attempted offset of a short-term capital gain  with an undocumented capital loss carryforward fares no better.

And though the Section 48D grant may not be taxable, compensation paid to employees isn’t, and is subject either to withholding or SE. Xing and Kat paid neither.

As for the title of this blogpost, here’s Judge Nega to tell you all about it.

“Although respondent determined in the notice that petitioners were liable for a QTDP recapture tax for 2009, respondent now contends that petitioners are liable for the recapture tax for the 2010 taxable year as a result of our holding in Silver Med., Inc. v. Commissioner, 147 T.C. at __ (slip op. at 11-15), where we held that a taxpayer was liable for the recapture tax in the taxable year the grant funds were disbursed. Petitioners received the grant funds in 2010, and therefore, if petitioners are liable for the recapture tax, they are liable for the 2010 tax year.” 2017 T. C. Memo. 81, at p. 23 (Footnote omitted).

They are and they are.

As for Silver, see my blogpost “Going Short to Go Long,” 12/19/16.

Whatever the fate of the Patient Protection and Affordable Health Care Act, I look forward to plenty of good blogfodder therefrom.

SPLITSVILLE, BUT NOT SPLIT

In Uncategorized on 05/15/2017 at 18:30

Mae Izzedin Asad, Petitioner, and Sam Akel, Intervenor, 2017 T. C. Memo. 80, filed 5/15/17, play a variation on a theme. Each is willing to split the liabilities in their unpetitioned SNOD 50-50.

But they’re in front of Judge Morrison on a stand-alone 6015 innocent spousery. Each of them filed a stand-alone, and IRS agrees to split.

It’s just not 50-50. Sam and Mae offer the 50-50 at the trial, not in their divorce decree, but that doesn’t matter.

Since Sam and Mae didn’t petition the SNOD, their good faith defense to the chops was off the table. You can’t litigate the chops at a stand-alone, only who gets hit with them.

IRS’s split stands.

“A committee report discussing the Taxpayer Bill of Rights 2 (in proposed form) observed:  ‘In some cases, a couple addresses the responsibility for tax liability as part of their divorce decree.  However, these agreements are not binding on the IRS because the IRS was not a party to the divorce proceeding.  Thus, if a former spouse violates the tax responsibilities assigned to him or her in a divorce decree, the other spouse may not rely on the decree in dealing with the IRS.’  H.R. Rept. No. 104-506, at 30 (1996), 1996U.S.C.C.A.N. 1143, 1153.  The resulting report from the Department of the Treasury similarly observed:  ‘Many taxpayers are apparently surprised to learn that under current law their divorce decree’s allocation of liabilities is not binding on creditors (including the IRS) who do not participate in the divorce proceedings.’  U.S. Dep’t of the Treasury, Report to the Congress on Joint Liability and Innocent Spouse Issues 44 (1998), https://www.treasury.gov/resource-center/tax-policy/Documents/Report-Joint-Liability-Innocent-Spouse1998.pdf.  (The report suggested that binding the IRS to the results of a divorce decree was impractical.  Id. at 41-44.)” 2017 T.C.Memo. 80., at pp. 6-7.

There’s more, but you get the idea.

If you want to bind IRS to your divorce decree, serve them. If you can.