That’s Judge James S. (“Big Jim”) Halpern’s directive to IRS’ counsel in Michael W. Aubin and Kerry A. Aubin, Docket No.  1814-20, filed 12/11/23. This is the ongoing Australian Outback kerfuffle (no, not a burnt Bloomin’ Onion, the hush-hush Pine Gap operation) about the Section 911(a) foreign earned income exclusion for the Pine Gappers.

For the backstory, see my blogpost “Not Even His Hairdresser Knows For Sure – Part Deux,” 6/8/23.

Remember, Section 7121(b) says that a closing agreement signed by Sec’y or delegate is final and conclusive, except fraud, malfeasance, or misrepresentation, and those have been blown away here.

This is the not-unfamiliar case of the boss running out of the office, while telling a subordinate “sign this for me and send it out.”

Mr. S, the signatory upon whom IRS relied, wasn’t in the class named in the Delegation Order. But his job description might get him in under the wire.

“While ‘[t]he development of a delegation order’ is the ‘preferred method’ for effecting a delegation of authority, other forms of delegation may be permissible. See IRM 1.11.4.3 (Oct. 10, 2008). In particular ‘[p]osition descriptions and other documents that describe an official’s duties with sufficient particularity are sufficient to provide the official with the authority necessary to carry out such duties.” Id. at 1.11.4.3.(4).” Order, at p. 2. ( Footnote omitted, but it mandates a proper Delegation Order when litigation is expected).

Mr. S’ job description says he’s “responsible for planning, developing, directing, and implementing a comprehensive, Servicewide, tax treaty administration program that enhances compliance with international tax laws and tax treaties.” Idem, as my expensive colleagues would say.

Well, the US-Australia tax treaty is certainly in play here.

OK, so Mr. S is in. Except he isn’t. He never signed nuttin’. Ms. P. signed. (Names omitted).

IRS “relies on Delegation Order 1-2, IRM 1.2.40.3 (Aug. 29, 1996), which grants to ‘[a]ll supervisory officials’ the authority ‘[t]o designate acting supervisory officials in the Internal Revenue Service.” Respondent argues that Mr. S, ‘[i]n his position as Assistant Deputy Commissioner (International) . . . was a supervisory official.’” Order, at p. 3.

Not good enough for Judge Big Jim, no way.

“Even if we were to accept that Mr. S was a supervisory official, he could not have delegated to Ms. P the authority to exercise the responsibilities of his position if he had received his own authority as Acting Assistant Deputy Commissioner (International) by delegation from another supervisory official under Delegation Order 1-2. The authority granted by Delegation Order 1-2 cannot be redelegated. IRM 1.2.40.3(4) (Aug. 29, 1996). And respondent’s motion does not address the question of how Mr. S received the authority to act as the Assistant Deputy Commissioner (International).” Order, at p. 3.

Formerly, delegation orders were a fave of protesters, but they went out of style when Boss Hossery came along. Guess they’re back.

Even when it doesn’t force settlement (see my blogpost “Why I Love Summary J,” 11/13/23), summary J takes away the nonessentials, the makeweights, and the hopers that we lawyers have been trained to plead lest we overlook anything that might be construed as a winning argument.

Judge Christian N. (“Speedy”) Weiler shows us how it’s done in Jackson Crossroads LLC, Greencone Investments LLC, Tax Matters Partner et. al. Docket No. 12235-20, filed 12/8/23. Both sides move for partial summary J.

The Jacksons go 6-for-8 on their motion.

IRS first, as it’s easiest. IRS wants Boss Hossery confirmed. The Jacksons don’t fight it, and anyway this is Dixieland Boondockery Golsenized to the Elevenses, who’ve eviscerated Section 6751(b) in Kroner. IRS could Boss Hoss it tomorrow.

IRS attacks the appraisals and appraisers, and Judge Speedy Weiler finds enough facts in dispute to put these matters over for trial. Turns out the Jacksons’ companions named the wrong appraiser as being qualified in their partial summary J motion. Order, at p. 10. That’s what happens when you clone pleadings on the wordprocessor; no substitute for hand-tailoring.

Now it’s the Jacksons’ (and their companions’) turn. There was a (a) a non-cash (easement deed) contribution (b) in year at issue. IRS only claims quid pro quo, but other than the tax break IRS shows none, and Congress intended a tax break.

The interest conveyed is a qualified real property interest. That there are already 15-year Forest Land Protection Act restrictive covenants in place is irrelevant; they’re not perpetual, and will expire by their own terms.

The deed sufficiently states the conservation purposes. “Congress did not determine to incentivize only the preservation of ‘natural’ or ‘high-quality’ areas but rather to allow a charitable contribution deduction for the donation of an easement that has, as its ‘conservation purpose,’ ‘the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem.” I.R.C. §170(h)(4)(A)(ii) (emphasis added).” Order, at p. 9. The Jacksons are “relatively natural.”

Oh yes, the 501(c)(3) is OK, and the Contemporaneous Written Acknowledgment passes muster.

Again, Judge Holmes’ Oakbrook dissent is justified: try the valuation, not the peripherals.

He’s back! Immunologist James (“Little Jim”) Haber wins one, in The Diversified Group Incorporated, et al., Docket No. 17038-18L, filed 12/7/23. He’s going to get to eyeball two (count ’em, two) of three memos IRS personnel prepared in connection with review of this case. One of the three involves an unrelated taxpayer, and so Section 6103 bars production.

But the other two step beyond the bounds of deliberative privilege, and go to the process itself. I’d love to quote Judge Emin (“Eminent”) Toro’s drilldown into the underpinnings of deliberative privilege; somber reasoning and copious citation of precedent abound, worthy of being dragged-and-dropped into every practitioner’s memo of law files.

Unhappily, the Genius Baristas have posted the order in a variant of PDF such that I cannot drag-and-drop. If this were merely a disservice to me, individually, it would be worth, perhaps, a shrug of the shoulders.

But it is a disservice to practitioners generally. Courts, both State and Federal, have held again and again that the right to inspect a document must include the right to abstract and copy. I know an order is not precedent and may not be cited as authority, except in the case to which it pertains and even then only for limited purposes. But the reasoning and cases cited in support thereof should be easily available to all.

If Section 7461 has any meaning, not only should decisions, opinions, and orders be made public, but they should be made public in usable format.

How ’bout it, Judge? You told IRS to play nice. Tell the Genius Baristas to play nice.

For those keeping score at home, we have reached Docket No. 19279-23, as at 12/6/23.  At the current rate of filing, we can expect further 1500 petitions through 12/31/23. The tsunamis of previous years, when 35,000 petitions were filed in a single year, are now of interest only to historians. And of this year’s crop of 20,000 petitions, fewer than one in a hundred will result in a T. C. Memo. Barely one in 600 will feature in a T. C. Sum. Op.

So don’t be surprised, dear reader, when there are days with nothing new in United States Tax Court,

Judge Nega gives IRS summary J tossing both of his last blows, thereby bringing to an end the ten (count ’em, ten) year saga of Estate of Joseph A. Insinga, Deceased, By Amanda Gilmore, Personal Representative, Docket No. 9011-13W, filed 12/5/23. The case outlasted Fighting Joe, but his memory will be fresh in these columns, as he furnished no fewer than 18 (count ’em, 18) blogposts.

The OS bucked Fighting Joe’s materials over to Exam, which was already pursuing the targets. Fighting Joe’s stuff and a face-to-face with IRS’ sleuths only confirmed the economic substance tack they’d already taken.

“The administrative record in this case amply supports the WBO’s ultimate findings that: (1) the issues identified in petitioner’s claim were already known to the examination teams, (2) the examination teams made the same adjustments after petitioner’s claim that they were planning to make before petitioner’s claim; and (3) petitioner’s claim information did not lead to any additional adjustments being made.

“Put another way, the WBO found (and the record so supports) that the IRS did not proceed based on petitioner’s information because petitioner’s information did not substantially contribute to any IRS action.” Order, at p. 20.

I wish Judge Nega had given Fighting Joe a T. C. Memo. rather than an undesignated order. It’s a paltry send-off; his memory deserves better.

Judge Morrison has to deal with a complicated intrafamily freeze-out of the children of the founder of a closely-held C Corp. It even caused me to give Judge Morrison a Taishoff “Good Job,” a year ago. So here’s all 140 (count ’em, 140) pages of Charles G. Berwind Trust for David M. Berwind, David M. Berwind, D. Michael Berwind, Jr.; Gail B. Warden, Linda B. Shappy and Valerie L. Pawson, Trustees, et al., T.C. Memo. 2023-146, filed 12/4/23.

It’s an old story: one son took control of the business, did some merger maneuvers, and redeemed out the siblings’ shareholdings when they objected. Apparently that was the gravamen of the litigation in USDCEDPA referred to in my above-cited blogpost. There is much argy-bargy in Judge Morrison’s opinion about PA law of corporate merger, which I leave to PA practitioners. And petitioners try to relitigate the USDCEDPA case, but get nowhere.

The question here is computation of the interest on the cash payment for the redeemed stock when it was released from escrow. Section 483 imposes built-in (unstated) interest when the price for a sale or exchange is paid out over a period greater than one year, to prevent gameplaying. But intent plays no part in the statutory language.

“The text of section 483 does not require that the person who exchanges or sells property be a party to the contract for the sale or exchange of property. By its terms, section 483 operates when there is ‘a property.’ § 483(a)(1). It does not require the parties to the ‘contract for the sale or exchange . . . of the property’ to include the person who sells or exchanges the property.” T. C. Memo. 2023-144, at pp. 136-137.

Although redemption took place when the final merger was consummated in 1999, payout was deferred to 2002 because of the litigation aforesaid.

The dissenters claimed the whole payout was capital gain effective at date of merger. And they argue origin-of-claim for the buyout settlement, but the claim originated with the disputed merger.

Of course, the buyer-out claimed an interest deduction per Section 483, got rejected by IRS, sued and won in USCFC. Hence the SNODs to the dissenters, although not preclusive.

Section 483(c) controls. As there’s a one-shot payment, Section 1272(a) allocation of payments doesn’t apply.

And of course the stipulation of settlement sinks the petitioners. T. C. 2023-144, at p. 140.

And That Goes For Women, Too

My longer-term readers will recall that ever since 12/28/20 I was laying blasts upon the DAWSON rollout: “shambolic schemozzle” about sums it up. See, e.g., as my expensive colleagues would say, my blogpost “I’d Rather Not Be Right,” 12/31/20.

But while we approach the third anniversary of that best-forgotten episode, I note Judge Elizabeth A. (“Tex”) Copeland must still deal with the fallout therefrom.

In proof of The Bard’s famous quotation first written at the head hereof, check out Jeremy Berenblatt, Docket No. 7208-17W, filed 12/1/23.

Yup, the same Jeremy Brerenblatt who starred in my blogpost “The Bialystok Blower,” 5/24/23.

Now Jeremy wants his new attorney to peruse the admin record and check out some misnumbered pagination. Except same has been sealed from the world and is lodged somewhere in DAWSON’s impenetrable bosom, inaccessible alike to parties and counsel.

Judge Tex Copeland to the rescue.

“…the Court held a conference call with the parties. The Court explained to the parties that during the transition from the Blackstone system to the DAWSON system, it appears the documents were sealed from both the parties and the public. The Court informed the parties that the Court will unseal the documents so that only the parties may view them. There was no objection from either party. The Court also explained to the parties that the discrepancy in page count noted by petitioner is due to the number of title pages each filing has.” Order, at p. 1.

So Judge Tex Copeland orders the Genius Baristas to let parties and counsel check it all out, but nobody else.

DAWSON’s creek rolls on.

Michael B. Shapiro, T. C. Memo. 2023-144, filed 11/30/23, has problems. He’s physially unable to practice medicine, and has heavy divorce costs and payments. But he’s either underpaid or not paid at all for four (count ’em, four) years at issue. Dr. S is fighting about the Section 6651(a)(2) and Section 6654 add-ons. He claims reasonable cause.

Ex-Ch J L. Paige (“Iron Fist”) Marvel has this one. “Resolution of this case does not require us to hold that taxpayers facing a genuine choice between satisfying court-ordered payments in a divorce proceeding or satisfying their income tax obligations timely should prioritize the latter over the former or vice versa.” T. C. Memo. 2023-144, at p. 20.

Dr. S. didn’t use ordinary business care and prudence, despite his tough economic position.

He never asked for an extension to pay, sought an IA, set aside monies to pay estimateds, sought out legitimate lenders to borrow money to pay, sought divorce court leave to liquidate assets to pay taxes, tried to find alternative sources of income besides his joint practice while he could practice, or sought guidance on bankruptcy as a solution.

“These actions or others may have provided only a partial solution, and some of them may have been ineffective under the circumstances at improving his ability to pay. Nonetheless, it is imperative that when a taxpayer unilaterally extends himself a de facto loan from the government on account of his own financial circumstances, he has adequately explored the available alternatives and taken those that are appropriate. The United States Treasury is not a taxpayer’s personal line of credit, or at least one of first resort. Dr. Shapiro has the burden to develop the record adequately to show that he has appropriately used it as such, but he has not done so.” T. C. Memo. 2023-144, at p. 22.

Bottom line, if you’re claiming ordinary business care and prudence, ya gotta try.

No, Take 15

See my blogpost “Take Two,” 11/22/23. The Glasshouse in The Stateless City shut its doors for Thanksgiving Day and, as an administrative bonus, kept it shut the Friday, as they did last year. Hence, although unnoticed by all but the fewest, Section 7451(b) gave an early present to Madiodio Sall, 161 T. C. 13, filed 11/30/23.

Even though Madiodio’s unadmitted representative caved when IRS claimed the 90-day cutoff, Judge Ronald l. (“Ingenuity”) Buch investigated Tax Court’s jurisdiction and finds Madiodio’s petition timely.

“Mr. Sall’s deadline for filing a petition would have fallen on Friday, November 25, 2022. The 90th day after the Commissioner mailed the notice of deficiency was Thanksgiving Day, a legal holiday. Section 7503 operates to automatically extend the due date to the next day that is not a Saturday, Sunday, or legal holiday. In this case the resulting deadline would be Friday, November 25, 2022. But we need not resort to section 7503, because the face of the notice of deficiency listed November 25, 2022, as the last day to petition the Court.” 161 T. C.13, at p. 3.

Madiodio missed the 11/25/22 cutoff. But Tax Court took that day off, and the Clerk’s office at 400 Second St., NW, location is a “filing location” within the meaning of Section 7451(b).

“The Petition was due to be filed on Friday, November 25, 2022. The Tax Court building in Washington, D.C., which houses the office of the clerk of the Court, was closed that day. Thus, a filing location was inaccessible that day; the availability of the Court’s electronic filing system is immaterial. The period of inaccessibility was one day. Adding that one day to the additional 14-day tolling period required by section 7451(b)(1) results in extending Mr. Sall’s petition deadline by 15 days from the original due date of his Petition. This shifts the petition due date to no earlier than December 10, 2022. Because that day was a Saturday, the petition deadline shifted even further, to Monday, December 12, 2022. The Court received Mr. Sall’s Petition on December 1, 2022, i.e., before that filing deadline. Thus, his Petition was timely.” 161 T. C. 13, at p. 4.

Poor Antawn Jamal Sanders, 160 T. C. 16, was tossed, because his e-filing was eleven (count ’em, eleven) seconds late, and DAWSON was then working. Madiodio got fifteen (count ’em, fifteen) days for his snailmailer, and who cares if DAWSON was working?

Hey, Supremes, time for some “discipline”?

There was another press release concerning Tax Court disciplinary proceedings today. I won’t go into details, except to note that, while some State courts’ disciplinary rules permit temporary or conditional suspensions from practice as a sanction, Tax Court Rule 202(f)(2) states that “A practitioner suspended for more than 60 days or disbarred pursuant to this Rule may not resume practice before the Court until reinstated by order of the Court.” This Rule, of course, encompasses discipline by any State or Federal Court.

I do want to mention one case, without naming the disbarred attorney, who has doubtless suffered enough, losing their practice with a prison sentence and supervised release thereafter. The tax and labor-related payments upon which the conviction and sentence were based amounted to $32K. Restitution in the sum of $5K was also ordered by the USDC.

Do I have to say it’s not worth it?