No, this is not another casualty loss case, nor yet another Dixieland boondockery. Here, Whistleblower 9252-18W, T. C. Memo. 2023-45, filed 4/3/23, claims Tax Court gets jurisdiction because he filed his 200 (count ’em, 200) Forms 211 after 12/20/2006, when the current sliding scale for remuneration for blowers came into effect.

9252-18W had filed the same stuff before with CID as an informant, and entered into a CIRA (Confidential Informant Reward Agreement) that expressly precluded 9252-18W from making any Whistleblower filing. But Judge Albert G (“Scholar Al”) Lauber doesn’t let that deter him.

CID dropped their investigation, having collected nothing, whereupon 9252-18W sued on the CIRA in USCFC and got tossed after six (count ’em, six) years of litigation. 9252-18W doesn’t let any of that deter him either; he then files his 200 Forms 211 under the current Section 7623, which of course get tossed by the Ogden Sunseteers with the usual “speculative and/or did not provide specific or credible information regarding tax underpayments or violations of internal revenue laws.”

9252-18W claims Tax Court has jurisdiction under the amended Section 7623 because they looked at his pre-12/20/2006 information after that date. “Petitioner contends, in other words, that our jurisdiction depends, not on when he supplied information to the IRS, but on when the IRS used that information, e.g., by commencing an investigation.” T. C. Memo. 45, at p. 5.

As Whistleblower information submitted pre-12/20/2006 was subject to complete IRS discretion as to amount of reward, 9252-18W would be out. But he submitted nothing new. And caselaw prohibits trying to slide old information in to get jurisdiction.

Finally, the classifier (IRS subject-matter reviewer) rejected 9252-18W’s stuff.

No dough, no go.

Judge Scholar Al calls in Mandy Mobley Li, Ogden’s closer. “In any event, assuming arguendo that petitioner supplied a scintilla of new information after the statute’s effective date, we lack jurisdiction because the IRS took no action with respect to his claims. This case, like whistleblower award cases generally, is appealable to the U.S. Court of Appeals for the D.C. Circuit. See § 7482(b)(1) (penultimate sentence); Kasper v. Commissioner, 150 T.C. 8, 11 n.1 (2018). That court held in Li v. Commissioner, 22 F.4th 1014, that we lack jurisdiction to review cases (like this one) where the IRS has issued a threshold rejection of a whistleblower’s claim.” T. C. Memo. 2023-45, at p. 6.

No, Not Non-Assessable

Alon Farhy,  160 T. C. 6, filed 4/3/23 owes the $10K per annum chop for willful nonfiling of Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations per Section 6038(b)(1), and $50K in continuations per Section 6038(b)(2) for the eight (count ’em, eight) years at issue. And Alon timely went to Appeals when he got the Letter 1153 NITL, and timely petitioned the NOD sustaining the levy. IRS Boss Hossed appropriately.

But ex-Ch J L Paige (“Iron Fist”) Marvel finds a wee problem, namely, viz., and to wit: IRS has no statutory authority to collect. IRS says these chops are assessable penalties, meaning they can enter them on their books per Section 6201 as a prelude to collection without the need for Section 6213 SNOD procedures, and collect as if they were taxes. But the statute doesn’t say that.

“Congress has explicitly authorized assessment with respect to myriad penalty provisions in the Code, but not for section 6038(b) penalties. Section 6671(a) provides that the numerous penalties found in subchapter B of chapter 68 of subtitle F (i.e., in sections 6671–6725) ‘shall be assessed and collected in the same manner as taxes,’ subjecting those penalties to the Secretary’s assessment authority under section 6201. Section 6665(a)(1) contains a similar statement that the additions to tax, additional amounts, and penalties provided in chapter 68 of subtitle F (i.e., in sections 6651–6751) “shall be assessed, collected, and paid in the same manner as taxes.’ Code sections outside of chapter 68 of subtitle F whose violations the Code specifically penalizes commonly  (1) contain their own express provision specifying the treatment of penalties or other amounts as a tax or an assessable penalty for purposes of assessment and collection, see, e.g., §§ 527(j)(1), 856(g)(5)(C),  857(f)(2)(A), 4980H(d)(1), 5000A(g)(1), 5114(c)(3), 5684(b), 5761(e),  9707(f); (2) contain a cross-reference to a provision within chapter 68 of subtitle F providing a penalty for their violation, see, e.g., §§ 1275(c)(4), 6033(o), 6043(d), 6046(f), 6046A(e), 6420(i)(2), 6421(j)(1), 6427(p)(1), 7501(b); or (3) are expressly covered by a penalty provision within chapter 68 of subtitle F, see, e.g., §§ 6652(c), 6674, 6675, 6677, 6679,  6685, 6686, 6688, 6689, 6690, 6692, 6693, 6695, 6698, 6699, 6704, 6705,  6706, 6707, 6707A, 6708, 6709(c), 6710, 6712, 6714, 6717, 6718, 6719, 6720. In contrast, section 6038 contains only a cross-reference to a criminal penalty provision, section 7203. § 6038(f)(1).

“Furthermore, 28 U.S.C. § 2461(a) expressly provides that ‘[w]henever a civil fine, penalty or pecuniary forfeiture is prescribed for the violation of an Act of Congress without specifying the mode of recovery or enforcement thereof, it may be recovered in a civil action.” 160 T. C. 6, at p. 7.

Ex-Ch J Iron Fist is “loath to disturb this well-established statutory framework by inferring the power to administratively assess and collect the section 6038(b) penalties when Congress did not see fit to grant that power to the Secretary of the Treasury expressly as it did for other penalties in the Code.” 160 T. C. 6, at p. 8.

So Janet Yellen will have to get Merrick Garland’s guys to sue, and in the meantime get Congress to amend Section 6038 (best of luck with that one).

A Taishoff “Good Job, First Class,” goes to Alon’s trusty attorney Edward M. Robbins, Jr.

All y’all will recall that Tax Court adopted ex-Ch  Maurice B (“Mighty Mo”) Foley’s amendments to the Tax Court Rules of Practice and Procedure, effective 3/20/23. Current Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan did not state, however, whether any or all of the amendments will be applied retroactively.

If I may make a modest suggestion, I propose that Rule 20(c) be given retroactive application. I have often commented in this my blog that the former Ownership Disclosure Statement Form 6 was a reef whereon many a small corporation, represented only by an unsophisticated officer, foundered, with the loss of what may have been a meritorious claim.

Not only is the newly adopted Rule 20(c) an immense literary improvement on its prolix predecessor, but the new Form 6 Corporate Ownership Disclosure is simpler and more readily understandable.

Hence I most respectfully urge reconsideration of STJ Adam B (“Sport”) Landy’s decision in Lil Orbits, Inc., Docket No. 12654-20SL, filed 3/31/30. In November, 2020, Lil Orbits was ordered to file the old Form 6 by February, 2021. Though Lil Orbits didn’t, they and IRS filed a stipulated decision in January of this year.  Whereupon STJ Sport Landy ordered Lil Orbits to show cause why they shouldn’t be tossed for nonfiling by March 17 of this year. The old Form 6 was attached both to the November, 2020, order, and the January OSC.

Taishoff says given that the new Rules came into effect a scant three (count ’em, three) days after Lil Orbits’ reply was due, and given that there were no adverse public comments on the proposed revision to Rule 20(c) and the adoption of the new Form 6, and given that there was no conceivable prejudice to IRS or anyone else in giving Lil Orbits a shot at filing the newly-adopted Form 6, and given the announced policy of the Supremes “to bring some discipline to use of the jurisdictional label” (Boechler) by requiring explicit Congressional establishment of jurisdictional barriers, and given that Section 7453 establishes no such barrier, why not let Lil Orbits file the new Form 6, and enter the stiped decision? As ex-Ch J Mighty Mo said in his commentary. “The proposed amendment is intended to eliminate unnecessary burdens on the parties and on the Court….”

Remedial amendments and enactments should be given broad application and retroactive effect.

Too much of a good thing is bad. That’s the lesson Judge Travis A. (“Tag”) Greaves has for IRS in Ivey Branch Holdings, LLC, Ivey Branch Investors, LLC, Tax Matters Partner, Docket No. 19189-19, filed 3/30/23. IRS files for summary J twice, and comes up empty.

Need I say this is another Dixieland boondockery? Guess not.

IRS wants summary J tossing the Iveys for want of compliance with the improvements-in requirements of Reg. Section 1.170A-14(g)(6). This they don’t get because of the Hewitt-Oakbrook jumpball: did 11 Cir invalidate the Reg entirely, or only so much as pertained to condemnation awards for post-donation improvements going to donor-grantor?

“In Oakbrook Land Holdings, LLC v. Commissioner, 154 T.C. 180 (2020), and Hewitt v. Commissioner, T.C. Memo. 2020-89, this Court upheld and applied Treasury Regulation § 1.170A-14(g)(6). However, the U.S. Court of Appeals for the Eleventh Circuit, in which venue would lie for an appeal in this case, reversed Hewitt and held that ‘the Commissioner’s interpretation of § 1.170A-14(g)(6)(ii), to disallow the subtraction of the value of post-donation improvements … is arbitrary and capricious and therefore invalid under the APA’s procedural requirements.” Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021), rev’g and remanding T.C. Memo. 2020-89. A few months after the Eleventh Circuit’s reversal in Hewitt, the Court of Appeals for the Sixth Circuit affirmed the Tax Court’s view of the regulation in Oakbrook Land Holdings, LLC v. Commissioner, 28 F.4th 700 (6th Cir. 2022), aff’g 154 T.C. 180, 189-200 (2020), causing a “split” in the Circuits. Petitioner in Oakbrook filed a petition for writ of certiorari with the Supreme Court, which the Supreme Court denied on January 9, 2023. No. 22-323, 2023 WL 124412 (Jan. 9, 2023).

“In light of the Supreme Court’s denial of certiorari, we will follow Eleventh Circuit precedent with respect to the issue of the validity of Treasury Regulation § 1.170A-14(g)(6). See Golsen v. Commissioner, 54 T.C. 742, 756–57 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971). Accordingly, respondent is not entitled to judgment as a matter of law based on his interpretation of § 1.170A-14(g)(6)(ii), i.e., prohibiting the subtraction of the value of post-donation improvements to the property on which a conservation easement exists from the proceeds in the event of judicial extinguishment. See Hewitt 21 F.4th at 1339.” Order, at pp. 7-8.

IRS also wanted summary J because the Iveys deed wants prior claims satisfied out of condemnation proceeds, but that founders on the same Hewitt-Oakbrook reef.

The Iveys reserved the right to build one structure within a defined two-acre piece of the property. IRS claims this doesn’t protect the property in perpetuity (see Section 170(h)(5)()A)), as these are “moveable rights.” Except Judge Tag Traves says the Iveys get only one shot at doing this, and if the donee 501(c)(3) shoots it down, they’re done. And IRS’ argument over forestry rights also fails, as there is enough protection provided by donee and State authorities.

Of course, IRS can try all this again at trial and in post-trial briefing.

In the second summary J motion, IRS sought gross valuation misstatement and reportable transaction underpayment chops if the Court invalidated the deductibility of the easement. But since they don’t get summary J on the first motion, they lose this one, but can try again.

Taishoff says this points up the need for the same kind of limitations our New York Civil Practice Law and Rules imposes on summary J motions. This salami-slice tactic is a waste of resources. I’m a great fan of summary J, as I’ve often said, but one size should fit all, and only come after discovery is complete. Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan, respectfully submitted.

Judge David Gustafson is up against The System, namely DAWSON, the new, improved (???), jim-handy electronic Czar of The Glasshouse That Vic Lundy Built. And he’s got thirteen (count ’em, thirteen) syndicated conservation easement cases lined up and waiting to do their “pretrial activity.”

The captions for Judge Gustafson’s order take up more than four pages of this six page order, so I’ll just cite to the first in numerical order of docket entry, Walker Drive Development Partners LLC, Walker Drive Manager, LLC, Tax Matters Partner, Docket No. 10748-20, filed 3/30/23.

There are enough differences among the properties and personnel involved to prevent consolidation for briefing and trial. But Judge Gustafson thinks that consolidating the cases for pretrial activity (I suppose that includes but is not limited to discovery, pretrial motions, and scheduling thereof) would be orderly.

The reason for the headline first written at the head hereof (as my looking-forward-to-the-two-Martini-lunch colleagues would say) is designating the place for trial.

“Atlanta is the requested place of trial for a five-case plurality of the thirteen cases, with Knoxville requested for three, Jacksonville for two, and one each for Birmingham, Nashville, and Tampa. Under the current configuration of the Court’s  “Dawson” case management program, cases with different requested places of trial cannot be consolidated. We will therefore make a nominal change to the requested places of trial so that all are designated for Atlanta. This change does not reflect an actual decision to try the cases in any particular location. When it is time to set the cases for trial, the Court will entertain a motion to change the place for trial.” Order, at p. 5.

Note that a principal difference between these cases is that different appraisers were used in some, although in all, counsel are the same, the properties are all in the same county, the pre-contribution highest-and-best-use is the same, “etc.” Order, at p. 5.

This situation calls for a Zoomietrial of whatever cases can be consolidated for trial and briefing. Have Zoomietrials been so flawed that only in-person trials will do? I’ve yet to see a Zoomietried decision being tossed on grounds other than those which would invalidate the decision in an in-person trial.

Kenneth S. Ingber & Karol H. Ingber, Docket No. 20904-22L, filed 3/29/23 (last Palindrome Day this year) had me scratching my head. Judge Mark V Holmes was waking the echoes of my blogpost “Without Prejudice?” 7/20/16.

Ken & Karol want to dismiss their petition from a NOD, and IRS says OK.

Judge Holmes dismisses, but states “without prejudice.”

As I said in my above-cited blogpost “If in fact there was jurisdiction based on a timely petition at that time, and if the one-hearing-per-tax-year rules of Section 6330(c)(4)(A) apply, then any new petition…must be time-barred, no?”

Well, yes and no.

Yes, Ken & Karol can’t go back to Tax Court; even with post-Boechler equitable tolling, they only get one hearing per tax year.

But perhaps like Richard T. Wagner and Margie Wagner, 118 T. C. 330, filed 4/15/2002, the lead case on motions for dismissal from lien/levy cases, they don’t want to be in Tax Court. The late Judge Laro dismissed Richard’s and Margie’s petition without prejudice to their right to go to USDC to fight over their NOL carryforward.

As Ken & Karol are represented by counsel, I must conclude there is a strategic retreat here.

So dismissal of a lien/levy petition is without prejudice both to petitioner and IRS. Judge Laro noted in Wagner that FRCP 41(a)(2) allowed dismissal unless there was prejudice (other than the prospect of another proceeding) to the other side (IRS); here, there isn’t. IRS can proceed with collection as soon as the petition is dismissed, unless Ken & Karol post bond or pay up and seek refund in USDC. And no prejudice to petitioner going to try their luck there; no issue or claim preclusion from Tax Court.

Takeaway- After 56 (count ’em, 56, and I have) years of practicing law, I should know by now that you have to read the cases.

I’ll use this heading from time to time to note in brief Tax Court opinions and orders that don’t merit a complete entry on their own account

First up, Robert A. Di Giorgio, Sr., T. C. Memo. 2023-44, filed 3/29/23. Rob is a mortgage and real estate wheeler-dealer, whose underreporting gets him deficiencies and chops north of $10 million, but get the second Ms. Di Giorgio, a Philippine national with minimal education, innocent spousery. Nothing novel here.

Next, John Landis Heinaman, Docket No. 11263-21L, filed 3/29/23. John is nailed for TFRPs for Heinaman Contract Glazing, Inc., for which he is a responsible person.

The only interesting thing in this off-the-bencher from Judge Goeke is that, notwithstanding telling John he has already had his chance at Appeals to contest liability and lost, thus taking liability off the menu, Judge Goeke lets him testify about liability on the trial. He admits paying creditors before paying IRS, Transcript, at p. 14.

“So despite the fact that the underlying liability is not before this Court, we note that petitioner’s position regarding the underlying liability is flawed.” Transcript, at p. 14.

And John was less than candid about his available assets when he applied for an OIC.

Unfortunately this objection to an offside call doesn’t apply when a would-be insured applies to one of the insurance exchanges established pursuant to the Affordable Care Act of 2010, is told they qualify for PTC, get APTC, and breach the 400% MAGI cutoff.

That statute has received so much criticism (not to say condemnation) from the entire political spectrum that I merely report Chalaundra Edjewel Sneed, T. C. Sum. Op. 11, filed 3/29/23, as another example of the failure of the exchanges scheme. A complicated system is inadequately explained, and operating personnel cannot always correctly advise applicants.

Chalaundra’s year-at-issue MAGI is over the 400% poverty level cutoff, so owes the $7K APTC she received. She didn’t attach her Form 8952 reconciliation to her 1040, but mailed it later.

Judge Elizabeth Crewson Paris: “Petitioner does not appear to dispute respondent’s determination on technical grounds but instead seeks a collection alternative because of financial hardship. In this proceeding to redetermine a deficiency under section 6213(a), the collectibility of the tax liability is not at issue before the Court. The Court notes, however, that the Oklahoma Marketplace informed petitioner that she was eligible for the APTC for 2018 because of an apparent misunderstanding of the application instructions on her part. The Court is not unsympathetic to petitioner’s plight. Nevertheless, the Court is bound by the statute as written and the accompanying regulations when consistent therewith. The simple facts are that petitioner’s MAGI exceeded eligibility levels and that she must repay the APTC payments made on her behalf. Accordingly, the Court sustains respondent’s determination.” T. C. Sum. Op. 11, at p. 5 (Citations omitted).

I must leave discussion of the other deficiencies in the present system to another place. This is, as always, a nonpolitical blog.

That’s Judge Mark V (“Vittorio Emanuele”) Holmes. I’ve given him this sobriquet, as he follows the famous unifier of Italy, who vowed to impose on the Italian nation even his errors of grammar.

Today he takes an ordinary indocumentado Section 165 nonbusiness casualty loss case, Thomas Richey and Maureen Cleary, T. C. Memo. 2023-43, filed 3/28/23, and elevates it with a footnote describing petitioners’ attempt to use real estate brokers’ Multiple Listing Service screenshots as a rationalization of their guess about the before-and-after valuation of their vacation home.

“In other words, the MLS printouts are akin to the rational tail of the intuitive dog that is the couple’s initial valuation of their home. See Jonathan Haidt, The Emotional Dog and Its Rational Tail: A Social Intuitionist Approach to Moral Judgment, 108 Psychol. Rev. 814, 822–23 (2001). It was not derived from those MLS printouts (in fact it resembles more of an intuitive evaluation); those printouts serve as a post hoc rationalization of their evaluation.” T. C. Memo. 2023-41, at p. 9, footnote 6.

“The rational tail of the intuitive dog.”

There is a painstaking trudge through all the elements of a casualty loss: proximate cause, actual physical damage, sudden and externally-caused (not natural deterioration), damage in excess of basis, cost of restoration (not improvement), before-and-after appraisal, uninsured loss or mandated insurance claim, $100 and 10% of AGI exclusions, and documentation of each element.

But the intuitive dog with its rational tail is the best part.

Three years back, STJ Peter Panuthos gave William French Anderson and Kathryn D. Anderson, T. C. Memo. 2023-42, filed 3/28/23, a shot at establishing that the six-figure legal fees they ran up were Section 162 ordinaries-and-necessaries to save Wm’s biomedical business.

And they do, to the extent of $13K. Wm and Kathryn can’t prove the remaining $347K was spent for anything but trying to get Wm out of the fourteen-year stretch he got for child molestation. See my blogpost “Mother and Child Reunion – Part Deux,” 4/29/20, for the backstory.

The key is the usual…the criminal acts did not take place on business premises nor in connection with business activity. Wm’s claim that he was set up by a business associate to steal his business was auf’d by an order in limine in 2021 (which I didn’t blog).

Wm, however, persisted, and that didn’t make Judge Elizabeth Crewson Paris more sympathetic to Wm.

“In the Court’s Order dated September 28, 2021, the Court granted respondent’s Motion in Limine to preclude any evidence or arguments that Dr.  Anderson was framed on false charges. In contravention of that Order, petitioners continue to argue in their Opening Brief that Dr. Anderson was falsely accused of the criminal charges for which he was convicted and that these accusations were part of the corporate sabotage and intellectual property theft scheme. Dr. Anderson was convicted by a jury of the charges brought against him, and the California Court of Appeal upheld that conviction. Anderson, 144 Cal. Rptr. 3d at 640. The Court will not further address this argument.” T. C. Memo. 2023-42, at p. 10, footnote 11.

Btw, the 2021 order did allow Wm and Kathryn to show expenses were incurred to investigate, prevent, or combat corporate sabotage, intellectual property theft, or other corporate malfeasance or potential threat thereof.

“Only the $3,000 paid to Mr. H, as evidenced by the invoice dated September 18, 2014, relates to Dr. Anderson’s gene therapy business. That invoice shows that Mr. H performed IT services for Dr. Anderson’s website under the instruction of Mr. O, including legal advocacy and promotion of Dr. Anderson’s business image. While the invoice contains no reference to the alleged wrongdoing by Dr.  Anderson’s former colleague, the work detailed in the invoice is clearly a business expense, and the Court will allow a deduction in that amount. Similarly, the two additional 2014 invoices from Mr. H, for $5,000 each, do detail work performed in the course of his investigation. Those invoices were paid by Dr. Kathryn Anderson in December 2014. The Court finds that these invoices represent additional business expenses and will allow a further deduction of $10,000.” T. C. Memo. 2023-42, at p. 12. (Names omitted).

Fascinating footnote: Among the attorneys representing the State in the appeal in the criminal case (146 Cal. Rptr. 606 (2012) was Kamala D. Harris, Esq.