My untiring mantra will form an intro to the next Tax Court Webstravganza, coming to a smartphone near you on 9/27/23,  STJ Diana L (“Sidewalks of New York”) Leyden serving as moderator. It’s a paean to the LITCs and calendar call commandos, first responders to the deer-in-the-headlights enmeshed in the anfractuosities of US Tax Court.

I can only hope that those who need it will heed it.

While Lakepoint‘s tale of backdated Boss Hossery is grabbing headlines, lower-profile cases are surfacing wherein IRS has been a wee bit less than candid and meticulous with its SNODs and Boss Hossery.

Ex-Ch J Maurice B (“Mighty Mo”) Foley slugs IRS thus: “[IRS’] conduct falls woefully short of our expectations for practitioners who regularly appear before this Court. Respondent’s counsel knew that the Answer Notice was the byproduct of an undisclosed reconstruction process. Counsel failed, in respondent’s first Status Report, to inform the Court of the reconstruction process. When questioned about the authenticity of the Answer Notice, respondent’s counsel admitted he had knowingly submitted a reconstructed document.

“We have no confidence that the slipshod-cut-and-paste Status Report Notice presented to the Court was the version of the notice of deficiency actually sent to petitioner.” R. J. Channels, Inc., T. C. Memo. 2023-109, filed 8/28/23, at p. 5.

And this case is not a one-off: “…respondent’s ‘common practice’ of reconstructing notices of deficiency is particularly disconcerting. Because respondent’s reconstruction has created doubt as to whether respondent determined the accuracy-related penalty in the notice of deficiency sent to petitioner, striking the revised Proposed Stipulated Decision is warranted. The parties shall file a revised decision document.” T. C. Memo. 2023-109, at p. 5.

IRS claims the COVID lockdown, which separated teletubbies from the paperwork, made them go to the scanned PDFs to do it. Maybe so, but tell the judge what you’re doing.

You can read for yourselves the back-and-forth wherein IRS’ counsel explain their reconstructionism.

I’ve had cases where documents needed to be reconstructed, but insisted that clients explicitly and conspicuously so label them, and document the circumstances which necessitated the same.

IRS wanted Section 6662 chops and a stipulated deficiency. I wonder what they will wind up getting.

Bloomberg, please copy.

Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan announces two (count ’em, two) additions to the ranks of the STJs, one arriving next month and the next the month after.

I’m pleased to welcome (as I’m sure my readers will) Jennifer E. (“Publius”) Siegel, ex-Public Affairs honcho, to CSTJ Lewis (“Honor That Name”) Carluzzo’s small but argute band. Ms. Siegel has been a constant correspondent over the years of her tenure at Public Affairs.

Let’s all welcome Zachary S. (“Highrise”) Fried, Esq., coming over to 400 Second Street, N. W., from 1025 Connecticut Avenue, the home of the Apartment and Office Building Association of Metropolitan Washington; as an old-time dirt lawyer, those are my kind of guys.

I look forward to illuminating opinions and great blogfodder.

Scott Allan Webber, Docket No. 14307-18L, filed 8/25/23, tries again to drench his liability in a cascade of alleged credits, seeking reconsideration and vacation, but Judge David Gustafson turns off the cascade.

The backstory is in my blogpost “With Cold Cascade – Part Deux,” 5/22/23.

“…on his tax return for each year in this series of years, Mr. Webber claimed as a payment a large credit elect from the previous year, and did not request a refund of the resulting large overpayment in the current year, but instead requested that the entire claimed credit be applied to the succeeding year (in an amount that he expected would greatly exceed the liability for that succeeding year). Thus, his apparent plan was to leave in the IRS’s hands indefinitely a large overpayment amount rolling forward. In order for the IRS to determine, in such a circumstance, whether in any year Mr. Webber has overpaid (or underpaid) his taxes, this ‘cascade’ makes it necessary to determine his liability for each year in the cascade. An adjustment in any year may affect the liability in any subsequent year. This is a situation—of Mr. Webber’s deliberate making—that is looking for trouble.” Order, at pp. 3-4.

Scott Allan is crafty: he files each return late, but not quite three (count ’em, three) years late, keeping SOL open throughout the cascade. This throws IRS’ recordkeeping off, as does “his unorthodox reporting,” Order, at p. 4. This does not endear Scott Allan to Judge Gustafson.

Nevertheless, and notwithstanding the foregoing, though the Tax Court cascade is now quenched, Scott Allan can try USCFC or USDC.

“As we noted in our opinion (at 30-32), Mr. Weber may have available the remedy of a refund suit, in which suit the issue would be not simply whether the IRS had allowed a credit (the only issue here) but instead whether Mr. Weber overpaid his tax for the years at issue in such a suit. In that case, he would then presumably have the opportunity to put on proof of his initial overpayment and of the unbroken cascade into subsequent years until the amount of the ‘available’ credit were to equal zero. But in this case, we cannot adjudicate that overpayment issue….” Order, at p. 4.

Hence Rule 155

I blogged Tax Court as preparer years ago, but that sort of service faded into distant memory. I also blogged petitioners who tried to turn Rule 155 beancounts into Rule 161 reconsids or Rule 162 vacations, but those met with such short shrift that they fell out of fashion.

Rule 155 remains as a bulwark of Tax Court practice; the parties, not the judges, do the numbers. I can’t see Judge Courtney D. (“CD”) Jones spending her leisure time booting up the TurboTax for the year at issue and sorting out Joseph William Sherman, Docket No. 22276-19, filed 8/24/23.

I didn’t blog Joseph William (that’s Doc Joseph William of the emergency room) when he appeared in T. C. Memo. 2023-63, filed 5/17/23, a mixture of “goofy regulation” and indocumentado, with little “to detain the tourist”, as that tire man says.

Doc Joseph William tried a Motion for Default and Dismissal, wherein he tried to reargue his case; this was too late for Rule 161 (30 days from opinion) and hadn’t any numbers to comply with Rule 155. IRS did the numbers, to which Doc Joseph William replied with an Answer.

“Therein, Dr. Sherman again disagreed with the Court’s Memorandum Opinion and asked the Court to review its findings. Dr. Sherman did not comply with the provisions of Rule 155.” Order, at pp. 1-2.

Enter decision for IRS.

Note to petitioners: When you have the papers, pound the papers. When you have the numbers, pound the numbers. When you have neither papers nor numbers, go pound sand.

Fan that I am of summary J, here is a textbook example of how this tool carves away the nonessential and focuses on the main point. Of course, the trusty attorneys for Bradford Resources LLC, Bradford Investors LLC, Tax Matters Partner, Docket No. 13012-20, filed 8/23/23, are the first team, including but not limited to Vivian D. (“Golden”) Hoard, Esq., whose forensic talents I’ve praised before.

First, clear the decks. The Bradfords want summary J that the 501(c)(3) to which they gave the conservation easement (for which they want a $24 million deduction, of which IRS allows $42K) is indeed a 501(c)(3). They brandish IRS’ own website, and Judge Christian N. (“Speedy”) Weiler agrees.  “The IRS, on its website, maintains a searchable list of tax-exempt organization [sic].” Order, at p. 2, footnote 2. Yes, they could do this at trial or by request for admissions, but there’s a good reason to do it this way. Get the judge involved early.

Next, the Bradfords want summary J that their Contemporaneous Written Acknowledgement, a ripped-from-the-Regs tracker, satisfies Section 170(f)(8). Here it is: “Your contribution to the ACC, a 501(c)3 nonprofit organization, is fully tax deductible. ACC has provided no goods or services for your charitable donation. Donation of a conservation easement on a 150.75-acre parcel located off Tanyard Road/Shelby County Road 449 in Harpersville, Alabama 35078 partially constituting tax parcel #175150000001.003 in Shelby County, Alabama.” Order, at p. 2. Can’t say fairer than that. And Judge Speedy Weiler likewise agrees.

Of course, there’s the landmine in the footpath. The Bradfords want summary J that their appraisal summary satisfies the standards of Section 170(f)(11)(C) and  Reg. Section § 1.170A-13(c)(4). IRS folded the 501(c)(3) status of the donee and the adequacy of the CWA. But IRS wants to play its standard gambit, and  knock out the appraisal rather than try the case on valuation. So IRS’ counsel asserts that the Bradfords failed “to disclose the presence of ‘biosolids and biosolid storage’ on the donated property.” Order, at p. 3. (Footnote omitted).

That, says Judge Speedy Weiler, is a question of fact. Now according to the omitted footnote above referred to, IRS raised the biosolids issue in an informal discovery request (Branerton play-nice), to which the Bradfords responded. So isn’t the issue the adequacy of the response, whether it was evasive or not fairly directed to the question posed? Of course, the Order doesn’t set forth the request nor the response. The real questions of fact are whether or not biosolids and biosolid storage are present on the donated property; what difference it makes to whether a valid conservation easement has been granted, and, if one has been granted, what impact the biosolids have on valuation.

But Ms. Golden Hoard and colleagues have materially advanced their cause. Summary J requires movant and respondent to marshal and lay bare their proofs.  The 501(c)(3) and the CWA are off the table. IRS has tipped its hand as to what it sees as a critical issue, to focus the Bradfords’ experts on a key point in their adversary’s case.

So the Bradfords got discovery from their adversary, they had a chance to show the judge that their claim had merit and that they were candid, and they gave away no major part of their trial strategy.

A Taishoff “Good Job, First Class.”

I open my sermonette today with a line characterised by one critic as “the most self-conscious theatricality since the days of Caesar Augustus,” but it fits Lakepoint Land II, LLC, Lakepoint Land Group, LLC, Tax Matters Partner Docket No. 13925-17, filed 8/22/23. This is the current Boss Hoss blockbuster brouhaha, featuring asserted backdated Boss Hossery and alleged IRS skullduggery.

I’ve been on this case for more than a year, now; see my blogpost “Boss Hoss in the Silt,” 8/18/23.

Judge Christian N. (“Speedy”) Weiler has before him all the discovery argy-bargy, and the Lakepoints are getting a lot of what they want. To what extent this will avail them is another story.

The Lakepoints want “name and title (if applicable), and provide the contact information, including phone number, email, and address, for any party including third party, with whom You {IRS] have communicated since the issuance of the FPAA, either orally or in writing, in connection with this Matter and/or received information or any Document directly or indirectly relating to or involving LakePoint’s Easement Donation or Fee Simple Donation or the determination of any Tax Liability resulting, directly or indirectly, from said donations.” Order, at pp. 2-3.

They get it.”… we agree that respondent’s objections are improper and that his reliance on the work product doctrine is misplaced. The work product doctrine protects documents, interviews, statements, memoranda, correspondence, briefs, mental impressions, and tangible things prepared by an attorney in anticipation of litigation or trial. Contrary to respondent’s assertion that petitioner’s motion is aimed at discovering respondent’s trial preparation activities, we fail to see how petitioner’s request for a ‘list of identities and contact information for witnesses contacted by [r]espondent’ is tantamount to ‘unwarranted inquiries into the files and the mental impressions of [respondent’s counsel].’” Order, at p. 3. (Citations omitted).

And now the Big Kahuna. “Interrogatory No. 8 seeks an explanation for why respondent failed to timely inform the Court or petitioner of the false statements made in the Motion for Partial Summary Judgement (MPSJ) concerning respondent’s compliance with the written supervisory approval requirements of section 6751(b)(1) and the First Brooks Declaration.” Order, at p. 4.

No soap. “We agree with respondent that to answer the question why respondent ‘failed to timely inform the Court or Petitioner of the false statements in the MPSJ and the First Brooks’ Declaration’ would necessarily disclose the discussions between and the strategies of respondent’s trial team members, which amount to mental impressions protected by the work product doctrine. Accordingly, we will not require respondent to supplement his response to Interrogatory No. 8.” Order, at p. 4.

But the Lakepoints get a palpable hit. Judge Speedy Weiler tells IRS to provide “name and title all IRS personnel, including, without limitation, all members of the Office of Chief Counsel, who became aware of any misstatement in the MPSJ or the First Brooks Declaration before Petitioner’s counsel contacted Respondent’s counsel on March 27, 2023 to schedule a meeting and provide the date on which such person became aware of any such misstatement.” Order, at p. 4.

As the Lakepoints are seeking sanctions, “(W)e will therefore direct respondent to make a forthright and comprehensive response… providing petitioner with the specific dates (or close approximation thereof). To the extent respondent asserts that the requested information does not exist or cannot be secured, he must certify that he made a reasonable search and/or request for the information and that, to the best of his knowledge, the response is complete.” Order, at p. 5.

There’s a lot more, and you discovery geeks will want the citations for your toolkits.

But I’m sad to tell the Lakepoints, and their highroller clients who are presumably paying for this, that Judge Speedy Weiler has told them Boss Hossery is a  nonstarter, whatever penalties and sanctions may befall IRS’ minions.

The whole story is in footnote 1 at page 1. “Absent stipulation to the contrary, this case is appealable to the U.S. Court of Appeals for the Eleventh Circuit, and we thus follow its precedent. See Golsen v. Commissioner, 54 T.C. 742, 756–57 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971).”

See my above-cited blogpost.

Edited to add, 8/23/23: To every gambit, there is always a countergambit. A brief exchange with colleague Peter Reilly, CPA, brought to light the motion for sanctions per Rule 104(c), barring IRS from introducing any evidence of compliance at any time and in any manner with Section 6751(b), taking Kroner out of the case.

Confronted by two (count ’em, two) IRS attorneys seeking to exit Desmond McGuire & Cory Lynne Brame, et al., Docket Nos. 25461-16, 22725-17, 11882-18, 15581-18, 5689-23, filed 8/21/23, Judge Ronald L. (” Ingenuity”) Buch rescues them, displaying a certain whimsy I’d never seen before in his usually sober style.

And I’ve listed all five (count ’em, five) docket numbers, because they are material.

“These five cases are consolidated. Counsel for the Commissioner includes Mr. S and Mr. H. As is apparent from the various documents that were filed, Mr. S and Mr. H are withdrawing from these cases. They attempted to removed [sic] themselves by filing seven separate notices of withdrawal as counsel, each of which was filed across all of these consolidated cases. Six of these were filed by or on behalf of Mr. S. Each bore a single docket number. And as a savvy reader did the math may have already realized, docket numbers were duplicated (see index numbers 30 and 33, and indices 31 and 35). In addition, although each of these notices of withdrawal was electronically filed in all of these consolidated cases, none of the notices of withdrawal filed by or on behalf of Mr. S included docket number 2589-23 in its caption. As for Mr. H, his notice of withdrawal of counsel was electronically filed in the lead case and across all of these consolidated cases (which is proper), but the caption only bore the docket number for the lead case.” Order, at p. 1. (Names omitted).

Apparently, Messrs. S and H perpetrated these delictions without reference to the announcement of across-the-board consolidated case filings; see my blogpost “All Together Now, One Two Three” 7/5/23. And see Practitioner Training Guide at pp. 33-37.

One more thing. “As for the substance of these withdrawals of counsel, they all recite that counsel withdraws, but go on to state that ‘[n]otice of the substitution’ as [sic] been given to opposing counsel. But there is no substitution; these are withdrawals.” Order, at p. 1.

Notice of substitution of counsel cannot be filed on an across-the-board basis; see Practitioner Training Guide at p. 34. Separate checks, y’know. See my blogpost thus entitled.

Judge Ingenuity Buch tells the hardlaboring clerks to clean this up by withdrawing the outgoers.

Rather than editing to add to my most recent blogpost “Boss Hoss In The Silt,” 8/18/23, I’ll just provide a brief footnote.

Judge Holmes’ concurrence in Graev,  149 T. C. 23, was certainly justified by Laidlaw and Kroner. Judge Holmes suggested back when 2 Cir overruled Chai, that whatever 2 Cir did should be confined to 2 Cir per Golsen, and the other Circuits left to work out their own salvation. See my blogpost “Stir, Baby, Stir – That Silt,” 12/20/17.

They sure did.

Let’s break precedent and honor the prophet.

My colleague Peter Reilly CPA just sent me a clip from Bloomberg about the alleged Lakepoint backdated Boss Hossery.

For some backstory on the alleged bogus Boss Hossery, see my blogposts “Always A New Gimmick,” 10/17/22, and “The High Bar,” 11/23/22.

Now before I go any further, I want to apologize to ex-Ch J Michael B (“Iron Mike”) Thornton. I waxed far too polemical in joining Judge David Gustafson’s dissenting views in Graev, 147 T. C. 16. Ex-Ch J Iron Mike read the law as written, whatever the result, and set it forth. I thought the result unfair and in no way an expression of Congress’ supposed intent. Two (count ’em, two) Circuit Courts of Appeal have agreed with ex-Ch J Iron Mike’s reading, and I am rebuked. I apologize for my intemperate remarks.

Now on to Lakepoint. Here is what I wrote to Mr. Reilly when he asked my views. We are rather colloquial in our exchanges.

This kerfuffle is about harmless error. Please hold my metaphorical beer.

Is Golsen still good law? Yes, AFAIK. To what Circuit is Lakepoint appealable? 11 Cir, right? No stip to the contrary, right? The issue in Lakepoint at this time is IRS’ Boss Hossery partial summary J, right? Amount of penalty, being a percentage of deficiency, cannot be determined unless deficiency, if any, is determined, right? And deficiency, if any, has not yet been determined, right? So neither deficiency, if any, nor penalty, has been assessed, right? Neither can be assessed unless current Tax Court proceedings have become final per Section 6213(a), and see also Section 7481, right?

So if all the above is true, what price Kroner v. Com’r, 48 F.4th 1272 (11th Cir. 2022), where Judge Brasher wrote:

“We disagree with Kroner and the Tax Court. We conclude that the IRS satisfies Section 6751(b) so long as a supervisor approves an initial determination of a penalty assessment before it assesses those penalties. See Laidlaw’s Harley Davidson Sales, Inc. v. Comm’r, 29 F.4th 1066, 1071 (9th Cir. 2022). Here, a supervisor approved Kroner’s penalties, and they have not yet been assessed. Accordingly, the IRS has not violated Section 6751(b).” Kroner, at p. 8.

To put it in plain English, in 11 Cir it doesn’t matter when first communication took place, or anything else. In 11 Cir, the past isn’t even prologue. The Boss Hoss could sign off today, and it would satisfy 11 Cir’s reading of Section 6751(b).

So whatever IRS did, good, bad, or ugly, may merit sanctions (like legals and admins) and a Section 6673 chop for baseless claims, and of course disciplinary action, both agency and in Bar disciplinary fora, against the individuals involved, but the case goes on, and chops are still on the table, at least until the Supremes deal with Section 6751(b).

Harmless error. Now keep the silt out of my (metaphorical) beer.