Lower The River

That’s Congressional engineering for ya, as exemplified by Section 24a, the child tax credit, $1K per kiddo, $3K max. But to the extent the allowable credit exceeds total tax due, the overage is transmuted into the additional child tax credit per Section 24(d), and is “refunded” to the taxpayer.

The quotation marks are used, because I do not see how that which was not paid can be “refunded” to the non-payor, but that’s the people’s duly elected representatives for ya.

Judge Morrison man-‘splains, in Damian Peter Daly & Jeanne Daly, et al., Docket No. 23070-19S, filed 7/11/22.

” For 2016, the Dalys reported that they owed tax of $226. They claimed a $226 child tax credit and an additional child tax credit of $2,774. The adjustments in the notice of deficiency resulted in an increase in the tax liability of the Dalys above $3,000. As a result, the notice of deficiency disallowed the $2,774 additional child tax credit and increased the child tax credit by the same amount, $2,774.

“In summary, the notice of deficiency allowed $3,000 for the total of both the child tax credit and the additional child tax credit, which is the total amount the Dalys claimed for both credits.” Transcript, at p. 6.

It has been said that worshipping the Internal Revenue Code is not idolatry: it is not “like any thing that is in heaven above, or that is in the earth beneath, or that is in the water under the earth.”

We’ve had it “always ding, dinging” in our ears to return phonecalls promptly, even before the NY Chief Judge’s Civility Rules. And far be it from me to condone, much less advocate, doing anything else.

But That Obliging Jurist Judge David Gustafson is willing to extend some leeway to an SO, at least to the extent of not deeming it an abuse of discretion, not to return a phonecall. Here’s the Candace Hellyar and Stephen Hellyar, Docket No. 12791-20L, filed 7/11/22, story.

“The crux of the Hellyars’ opposition to the Commissioner’s motion is that ‘SO R did not respond to Mr. Heller’s voicemail message [left July 14, 2020]. Instead, she closed the case’ without any further communication when she issued the notice of communication [sic; I think you meant “Notice of Determination” Judge} two and a half months later on September 30, 2020. It may be that a ‘best practice’ would always be to return every phone call, but we cannot say that the SO’s failure to do so in this instance constituted an abuse of discretion.  The CDP hearing is an opportunity for the delinquent taxpayer to request forbearance by the IRS in its discharge of its obligation to collect taxes that are due.  The taxpayer does not always fulfill his role in that hearing simply by trying to return a call and then leaving it to IRS Appeals to initiate further communication. IRS Appeals had given due consideration to the Hellyars’ 4% OIC and had, in the absence of any specific proposal by the Hellyars, made its own proposal of an installment agreement to which it would agree. It was then incumbent on the Hellyars to make a substantive response to IRS Appeals’ proposal. Instead, they simply left a voicemail message that (as the Hellyars describe it) ‘request[ed] an opportunity to discuss the appeal’. This may have been a reasonable first step. But when that communication stalled and IRS Appeals did not reply, the Hellyars were not entitled to sit back for weeks on end, leaving it to IRS Appeals to move the matter forward. IRS Appeals had already given its suggestion of the way forward—i.e., the installment agreement it had proposed. The ball was in the Hellyars’ court, not IRS Appeals’s. It was not an abuse of discretion for IRS Appeals to determine after the passage of two more months that the Hellyars would not be accepting the proposal of an installment agreement nor making a counter-proposal.” Order, at p. 6. (Name omitted).

Return phonecalls. Follow up when the other side does not. Document every effort to communicate. And tell ’em the Hellyars sent ya.

Might as well, as DC Cir has rendered that enactment completely illusory. And pension off the Ogden Sunseteers; there’s no reason for them to report for work, either physically or electronically, as all they have to do post-Li is nothing.

Mandy Mobley Li offered herself up on toast. As I said when Mandy Mobley first surfaced, “…perhaps maybe so this is a family law thing gone wrong. Just sayin’, not fur nuthin’.” See my blogpost “Ran The Checklist,” 4/6/20.

And Mandy Mobley was pro se then and thereafter. So when she was well and soundly trounced by Judge Courtney (“CD”) Jones, she appealed to DC Cir, all by her lonesome.

Remarkably, despite the much-proclaimed lenity shown pro ses, especially those as obviously hapless as Mandy Mobley, rather than seeking pro bono assistance for her, DC Cir engaged two attorneys (qualifications unstated and to fame unknown as far as the internet goes) as amici, to teach DC Cir about jurisdiction under Section 7623.

Truly, I can’t make it out.

I thought judges were the ones to decide questions of law. The only time an expert opinion might be required is when foreign law was at issue. Or so I thought.

As it happened, no sooner did the two amici conclude (might I indulge in a wee “nudge nudge, wink wink, say no more”?) that Tax Court had no jurisdiction unless IRS did something besides toss the claimant, than IRS folded. What Mandy Mobley did is unclear, but probably resembled a deer in the headlights.

From IRS counsels’ point of view, this is a gift. This is one entire area in which they have to do no work. Ditto from the Ogden Sunseteers’ point of view. And as Tax Court has exclusive jurisdiction (Section 7623(b)(4)), I can’t think but that a reduction in workload is welcomed by that hard-pressed Bench.

Now all that’s necessary is for Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan to issue the stereotyped order in, for example, Ronald R. Kopko, Docket No. 19210-21W, filed 7/8/22. “…the stay of proceedings in this case is lifted. … the parties are no longer required to file status reports on or before September 30, 2022. … on the Court’s own motion, this case is dismissed for lack of jurisdiction.” Order, at p.1.

But how about claimants who have something? And who can’t afford to hire or engage counsel? Are contingency fees permitted in whistleblower cases (cf. Circular 230, 31 CFR §10.27(b))? It’s not clear.

So the tax whistleblower statute, a creaky vehicle at its best, is now completely broken down.

Unless another Rich Lacey, with the wherewithal to pay counsel, arises from without the bounds of DC Cir, gets tossed by the Ogden Sunseteers and Ch J TBS, and appeals to a different Circuit, whose Judges aren’t afraid to decide the law their own selves. And maybe so even make some people work for a living.

For Rich Lacey’s story, see my blogpost “The Whistleblower Office – Blown,” 11/25/19

Note this is a nonpolitical blog; my views of current Federal judicial appointments have no place here.

Judge Courtney D (“CD”) Jones was much moved by the plight of Julian Wolpert and Estate of Eileen Wolpert, Deceased, Julian Wolpert, Executor, T. C. Memo. 2022-70, filed 7/7/22. Y’all will no doubt remember IRS counsels’ attempts to wild-card the “goofy regulation” into an indocumentado Section 162 deductions case, and an equally far-fetched endeavor to claim The Calculation Electronic duck of Boss Hossery.

What, no? Then see my blogpost “If At First You Don’t Succeed, Don’t Make It Worse,” 3/16/22.

Julian urged that trial must proceed speedily, because his trusty attorney’s equally trusty law student clinicians were about to scatter for summer vacation (or maybe white-shoe summer internships).

Well, student aid avails one little, if for substantiation one has only the Michael Corleone gambit. It seems one of Julian’s nearest and dearest, shortly after the decease of the late Eileen, inadvertently tossed the business records that could have saved part of the day.

“Notwithstanding Mr. Wolpert and the estate’s vague representations on brief that Ms. Narli inadvertently threw out business records stored in the Wolperts’ Honesdale residence following Mrs. Wolpert’s death, there is no evidentiary basis in the record (including Ms. Narli’s testimony) supporting such an allegation.” T. C. Memo. 2022-70, at p. 16. (Footnote omitted, but see infra, as my expensive colleagues would say).

“Mr. Wolpert and the estate did not specify when this incident allegedly took place. If the business records were thrown out in mid-2016, such an incident should have had no impact on business records generated after that date (including all of 2017).” T. C. Memo. 2022-70, at p. 16, footnote 32.

A couple times (hi, Judge Holmes) Judge CD Jones notes there isn’t even an attempt to Cohanize whatever isn’t sunk by Section 274 specificity.

In the interests of full disclosure, I note that one of the trusty student aides from Prof. Maresca’s Fordham Law School’s clinic spent a summer interning at a law firm with which I share office space. I was unaware of her involvement in this case until I read the opinion today.

We’ve all been there: the note of triumph, as the decision is a paean of victory, or the grating, jarring grind of defeat as the judge eviscerates all the work one’s done. And then the brisk movement, or painful trudge, to the street, where the world is going about its business regardless.

But whichever it is, counsel, Judge Ronald L. (“Ingenuity”) Buch has a reminder for you. Pick up your trial exhibits. Appeal or no appeal, whatever you’ve given in discovery, attached as exhibits to motion papers, or introduced on the trial, make sure you pick them up, or, at the very least, have copies that you can certify as true copies of the originals.

Unfortunately, fifteen years ago, when John Edward Barrington and Deanna Barrie Barrington, T. C. Memo. 2022-68, filed 7/6/22, were copping heavy-duty pleas to fraud and tax evasion, the high-speed scanner and The Cloud were not to be found in every office. “Documents obtained by the government in pursuit of the Barringtons’ cases consisted of more than 10,000 pages, including records seized by the FBI. Their attorneys gave them copies of discovery documents.” T. C. Memo. 2022-68, at p. 3.

Of course, today every 9-year-old knows that 10,000 pages barely wets the beak of an off-the-shelf 1-terabyte hard drive. Solely by way of illustration of the foregoing, see my blogpost “The Forty Million,” 4/29/15.

But John’s and Deanna’s attempt to overturn IRS’ deficiencies founder for want of the documentation they could have had, but didn’t.

“In the time between the criminal pleas and the Commissioner’s civil examination, the FBI’s records were destroyed in the ordinary course of its operations. The FBI notified the Barringtons that they could reclaim their records and held them for some time. During that time, the Barringtons never attempted to reclaim their records, and the FBI destroyed them in late 2009. When the Commissioner commenced a civil examination in 2012, the examination function could not obtain records from CI because they were grand jury materials.  Bank records were also unavailable because of the amount of time that had elapsed since the years at issue. As a result, the Commissioner used the information and figures from the plea agreements as the basis for his deficiency determinations.” T. C. Memo. 2022-68, at pp. 5-6. (Footnote omitted, but it says the grand jury materials were destroyed by Criminal Investigation in “the normal course of operations.”)

Spoliation worth a try? Intent to preserve is an issue. And we don’t know if John and Deanna were in the slammer when they could have tried to recover the documents.

Anyway, John and Deanna have nothing wherewith to rebut most of IRS’ numbers.

Takeaway- Pick up your trial exhibits (and everything else). Scan and back up.

Clair R. Couturier, Jr., T. C. Memo. 2022-69, filed 7/6/22, is back, but the ten (count ’em, ten) years’ worth of 1040s he failed to hide from the motley viewers at 400 Second Street, NW (for which see my blogpost “The Place Where There Is No Darkness,” 4/1/19) avail him nothing. IRS never examined any of them before they hit Clair with the Section 4973 6% per year chop on the $25 million excess contributions.

So Clair’s estoppel arguments go down. And I was right three years ago: it was an IRA retroactively rejected.

Clair was disqualified as to two pieces of his IRA package, so when he cashed out and rolled, he didn’t have a taxable event until he made good the excess by taking it in as income in whatever year he chose, or until IRS called him on it, but the 6% chop kept right on going.

Now before my ultra-hip readers go all Hellweg on me, remember that IRS had actually examined the 1040 for year at issue in Hellweg, took one position, and then reversed field. See my blogpost “Foolish Consistency,”  5/5/11.

Here’s Judge Albert G (“Scholar Al”) Lauber with the story.

“Petitioner’s reliance on Hellweg is misplaced for the same reason the taxpayers’ reliance was misplaced in Mazzei I. In Hellweg the IRS examined the taxpayers’ income tax returns, issued them ‘no change’ letters, conceded the transaction’s validity for income tax purposes, and sought to take the opposite position when asserting an excise tax deficiency. The IRS in the instant case did not examine petitioner’s … income tax return and took no position regarding the tax liability reported on that return. Petitioner seeks to equate the IRS’s inaction on the income tax front with its explicit concession in Hellweg. But as explained previously, the IRS’s failure to examine a return, or to challenge a particular position taken on a return, does not constitute a concession or admission that the taxpayer’s position is correct. * * * * The IRS did not take ‘inconsistent positions’ here, as we found that it had done in Hellweg. And while the IRS may be ‘legally precluded’ by an explicit concession, it cannot be precluded by inaction, inattention, or silence.” T. C. Memo. 2022-69, at p. 10. (Footnote omitted, but it discusses Ohsman, which I discussed in my “Foolish Consistency” blogpost, above cited).

For Mazzei I, see my blogpost “Foolish Consistency – Redivivus,” 4/1/14.

Y’all may have noticed a lack of Section 7623 whistleblower cases on this my blog, and elsewhere.  No surprise, as Mandy Mobley Li put paid to Tax Court review of anything except where IRS actually proceeds administratively or judicially. The Ogden Sunseteers can rest in certainty that, if they do nothing, they are exempt from judicial review.

See my blogpost “Sealed and Blown,” 5/17/22.

So today Atm Shafiqul Khalid, Docket No. 13967-19W, filed 7/5/22, is tossed as a thresholder reject. Y’all will remember Atm from my blogpost “It’s An Order, Not A Suggestion,” 11/20/20; if you don’t remember, Atm was the man who refused to abide by a Rule 103 protective order from then-Ch J Maurice B (“Mighty Mo”) Foley.

Today, DC Cir has spared Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan from any need to deal with Atm or motions pro or contra.

“By opinion issued January 11, 2022, in the case of Li v. Commissioner, 22 F.4th 1014 (D.C. Cir. 2022), the Court of Appeals for the District of Columbia Circuit held that the Tax Court lacks subject matter jurisdiction of whistleblower cases, such as this one, involving threshold rejections of claims for whistleblower award. By Order issued March 4, 2022, proceedings in this case were stayed pending the final outcome of Li v. Commissioner. The court of appeals’ judgment in that case is now final.” Order, at p. 1.

So the stay of proceedings is lifted, in order to toss Atm, moot all pending motions, and relieve the parties from filing any further status reports.

But just for the record, I’ll repeat what I said back in May: “Taishoff says DC Cir has made mincemeat of the whole tax whistleblower system. All the Ogden Sunseteers have to do is do nothing; no award, no Tax Court jurisdiction (and Tax Court’s jurisdiction is expressly “exclusive,” so no one else can look either).

“So thanks to DC Cir, the brand-new Chief Whistler Mr. John W. (“Hoppin’ John”) Hinman has the easiest job in the world; he can run the 100% sequester.”

Though the nomenclature might be a wee bit confusing, last month there was celebrated as a national holiday for the first time National Independence Day, s/a/k/a Juneteenth. Today is celebrated just plain Independence Day.

In each such event, Tax Court is closed, and so am I.

No, not another Rule 162 vacation of a decision or order. This time it’s the real vacay, the loading up of the rented minivan, or the Uber to the airport, followed by adventure and the happiest of memories, or an experience in contrast to which Dante’s ninth circle would be a delicious treat. And the memo?

In those long-gone pre-smartphone and tablet days when I was a partner or of counsel, when one went away for more than a three-day, one was required to leave one’s desk absolutely bare, save only for a memorandum at the center thereof. That memorandum was a précis of every matter on which one was currently engaged, with client contact information, adversary or counterparty information, details of matters requiring attention, and one’s own detailed itinerary and how one might be contacted.

I remember lengthy phonecalls in an Edwardian sittingroom in Chiswick, on a payphone in a bar in Elmira, New York, and the bemused glances of passersby as I fed Euros into a payphone in Veere, in the Netherlands.

Of course, in preparing the aforesaid memorandum, one did something with each matter, to show one’s partners, associates, and staff, how irreplaceable one was.

Today, as we start the July Fourth three-day and the beginning of the serious summer travel season, the United States Tax Court bench is not behindhand, unloading 933 (count ’em, 933) orders. There are some 700 standing pretrial orders (regular and small-claimer) to keep the petitioners occupied, and a few more detailed types.

Here are just two.

Sharon O. Eddy & Stuart W. Eddy, Deceased, Docket No. 14165-22, filed 7/1/22, has Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan worried about the late Stuart’s estate. I point out that estates aren’t “probated”; wills are probated; estates are administered after they become subject to proceedings in probate court.

Here’s Sharon’s assignment. “…petitioner shall file a status report and therein provide information regarding the following matters: (1) whether the estate of decedent Stuart W. Eddy has been or will be probated; (2) if decedent’s estate has been probated, whether an executor, administrator, or other fiduciary has been duly appointed for decedent’s estate by a court of competent jurisdiction and, if so, the name and address of such duly appointed fiduciary; (3) if no fiduciary has been duly appointed by a court of competent jurisdiction, whether there is a successor trustee or similar fiduciary with respect to a living trust established by decedent and, if so, the name and address of such fiduciary; (4) whether any fiduciary of decedent’s estate intends to prosecute this case on decedent’s behalf by filing an appropriate motion to substitute parties and change caption (to which should be attached relevant documentation supporting the individual’s or entity’s status as a fiduciary with legal capacity to represent decedent’s estate); and (5) if decedent’s estate has not been or will not be probated and decedent’s estate otherwise has no fiduciary, the names and addresses of decedent’s heirs at law, except for petitioner Sharon O. Eddy. A copy of decedent’s death certificate shall be attached to the status report.” Order, at pp. 1-2.

A different petitioner is Martin G. Plotkin, Docket No. 16224-14L, filed 7/1/22. There’s a bit of backstory in my blogpost “Multiplex Man,” 2/3/21. Martin gives away nothing to The Energizer Bunny; Martin has six (count ’em, six) new motions, and Judge Morrison would like a separate reply to each from IRS’ counsel by 8/1/22. Five of the six relate to individual Appeals employees, and one is a document request.

As lien cases are record rule, I wonder about relevance, but we shall see.

Meanwhile, desks are cleared for vacation. Off to sun ‘n’ fun.

As at 6/30/22, I am informed that this my blog had 421 followers. Further, I am informed that this my blog had 2,332 views for the month ended 6/30/22 (including Saturdays, Sundays, and days which are legal holidays in the District of Columbia), the fewest views since the first-half of calendar 2020, in the depths of the COVID pandemic.

I deduce from the foregoing statistics, without having made independent investigation of their accuracy, that my “followers” simply aren’t “following.” Had even 200 of the 421 viewed this my blog even once daily on 20 days, not the whole 30, there would have been 4000 (count ’em, 4000) views during the said month, not 2,332.

So I invoke the words of Tom Jones’ and Harvey Schmidt’s 1960 classic.