Perusing the Proposed Tax Court Rules, I find that Rule 27 is indeed amended only stylistically, and that “(No) substantive change is intended.”

Thus, upon adoption, Rule 27(b)(2)(B) will read “( U)nless the Court orders otherwise, access to an electronic file is authorized as follows: (2) any other person may have electronic access at the courthouse to the public record maintained by the Court in electronic form, but may have remote electronic access only to (B) any opinion, order, or decision of the Court, but not any other part of the case file.” (Emphasis added).

I most respectfully suggest that the Rule be further amended to add the headline hereof to the end of said Rule.

Stipulated decisions are sealed; why? Entire dockets are sealed without Court order; why?

Justice must not only be done, it must be seen to be done. Justice concealed is justice denied.

Shawn Stephen Salter, T. C. Memo. 2022-29, filed 4/5/22, got his asserted deductions disallowed when he proffered a 1040 after he got the SNOD. He claimed he’d filed timely, but produced no proof. Since the SNOD came from a SFR, itemized deductions are off the menu. You have to elect to itemize, and you can only elect on a timely-filed return, Section 63(e)(1).

Shawn’s attempt to deduct unreimbursed medicals from the 10% Section 72(t) whatever-it-is (tax? addition?) on his retirement plan drawdown fails, because the amount he sought to exclude was less than 10% AGI, thus hitting the Section 213 cut-off.

IRS magnanimously conceded at trial the late-payment addition, but not the late-filing addition.

I’m sure Shawn was really pleased with the result.

“The notice of deficiency also determined a late-payment addition to tax of $1,527.25—25% of the deficiency—under section 6651(a)(2). By virtue of section 6651(c)(1), the failure-to-file addition to tax shown in that notice was therefore reduced to $1,374.52. Since respondent has conceded the addition to tax for late payment, section 6651(c)(1) does not apply, and the failure-to-file addition to tax will be larger than determined in the notice of deficiency.” T. C. Memo. 2022-29, at p. 6, footnote 2.

Takeaway: If IRS offers to drop late-payment but keep late-filing, reject the offer. Timeo Danaos et dona ferentes. And you don’t need a M. A. in Classics from Clare College, Cambridge, like Judge Scholar Al, to figure that one out.

Allowable living expenses for CDP standards (RCP, CNC, OIC, IA, PPIA) are local. Like politics. And since this is a nonpolitical blog, we’ll stick to the allowable expenses for the locality wherein the taxpayer resides.

Robert J. Norberg and Debra L. Norberg, T. C. Memo. 2022-30, filed 4/5/22, say their circumstances leave them worse off than locally allowable, but have no evidence in support thereof.

Judge Albert G (“Scholar Al”) Lauber won’t disturb Appeals’ NOD.

“We find no abuse of discretion. Although petitioners allege that their cost of living exceeds their income, this allegation appears based on the expenses reported on their Form 433–A, without reference to prevailing local standards. SO2 was authorized to rely on those standards in assessing their ability to pay, and it was their burden to justify a departure from the local standards. See Friedman, 105 T.C.M. (CCH) at 1290. Petitioners have not attempted to meet that burden.” T. C. Memo. 2022-30, at p. 6. Note, SO2 is Settlement Officer 2, the one who rescued the Norbergs’ file from the COVID-locked-down IRS office.

Of course, the Norbergs can always try again for an IA, a PPIA, or an OIC; just bring the substantiation along.

First is the new favorite, the “goofy regulation,” the Perpetuity Rule, Reg. Section .170A-14(g)(6), beloved in 6 Cir but condemned in 11 Cir. And Judge Travis A. (“Tag”) Greaves, the master of fancy footwork, does a Highland Fling in Briarcreek Preserve, LLC, LDHL Investments, LLC, Tax Matters Partner, Docket No. 1547-18, filed 4/4/22.

For those who tuned in late, a major subset of the Perpetuity Rule is improvements-out-at-extinguishment. Judge Tag Graves has a really good explanation, so I’ll let him give it.

“To illustrate, assume a taxpayer donates a conservation easement worth $30 on unimproved property with an unencumbered value of $100. The judicial extinguishment regulation mandates that the donee receive at least 30% of total sale proceeds ($30 ÷ $100 = 0.3). Assume further that the taxpayer later adds improvements worth $50, and sells the property for $150 following judicial extinguishment of the easement. Briarcreek’s deed would allocate the donee $30, which is 30% of $100, the difference between the $150 of sale proceeds and the $50 value of the improvements. But $30 is only 20% of the $150 total sale proceeds. The regulation requires that the donee receive at least 30% of $150, or $45.” Order, at p. 5.

Now before you give me the Matthew 25:24 sobstory, the tax break isn’t free; Congress had a purpose, the preservation of that which without its intervention via IRC would be lost. It wasn’t to give the beneficiary of the tax break the deal they wished they had. And the donor can always not make any improvements: forever wild, right?

The Briarcreeks had an improvements-out deal on their Burke County, GA scrub. They want summary J that the Perpetuity Rule, a/k/a the “Goofy Regulation,” is out, per Hewitt, and they’re Golsenized to 11 Cir, so that should be a slam-dunk.

But Judge Tag Greaves is dancing.

“Although the Golsen rule prevents this Court from denying petitioner’s deduction on this ground, we will hold petitioner’s motion in abeyance pending further appellate developments on the validity of Treasury Regulation § 1.170A-14(g)(6). Cf. Montgomery-Ala. River, LLC v. Commissioner, T.C. Dkt. No. 9254-19 (Feb. 25, 2022) (order taking a similar approach).” Order, at p. 5.

See my blogpost “And Quiet Flows the Silt,” 2/25/22 for the Montgomery story.

But the Briarcreeks aren’t through; it’s open season on the conservation easement regulations. Now they’re attacking the spill-your-basis regulation, Reg. Section 170A-13(c). They don’t know what basis to use, and cite to the wrong part of the instructions for Form 8283. They say the statute requires the disclosure in the return, but IRS has it in the Form 8283. But a “return” includes all schedules and attachments required. And the statute (the Deficit Reduction Act of 1984 (DEFRA)) is broad enough to encompass whatever IRS did.

Of course, the Briarcreeks claim reasonable reliance, but that’s a fact question, so IRS doesn’t get summary J.

Summary J to IRS sustaining the spill-your-basis regulation but keeping reasonable reliance open for trial; and on summary J to IRS on the Perpetuity Rule, held in abeyance pending “further appellate developments.” Taishoff translation “pending what the Supremes do with this.”

Next goofy development. STJ Peter Panuthos shows remarkable sang froid in dealing with the good-faith reliance argument of Suzanne M. Scholz, T. C. Sum. Op. 2022-5, filed 4/4/22.

“Although petitioner hired H&R Block to prepare her tax return, the Court is not convinced that she provided necessary and accurate information to her return preparer and that she actually relied in good faith on the return preparer’s judgment. Petitioner failed to keep adequate records of her reported business expenses and charitable contributions. Furthermore, she testified at trial that she included certain expenses on her tax return against the advice of her paid tax preparer.” T. C. Sum. Op. 2022-5, at p. 14.

Ms. Scholz was self-represented. So no counsel was present to follow the advice of the late great Henry G. Miller, Esq., to smile the sweetest smile, as if that testimony was exactly what one wanted to hear, then walk out into the hallway and sob.

Unrepresenteds don’t win TFRPs; either they don’t go to Appeals, and petition the NFTL or NITL that follows their nonappearance, in which case liability is off the table and the end-run of a doubt-as-to-liability OIC is a nonstarter; or they bury themselves before the AO or SO, wherefore their petition of the NOD is a waste of sixty bucks plus postage.

Especially is this the case in record-rule jurisdictions like CA. If the record at Appeals is the whole story, better show up and tell a good one. If you have a good one.

I’ll make an offer of proof. Here’s Luke J. Middleton, T. C. Memo. 2022-28, filed 4/4/22.

Luke “..opened a checking account for [corp] on December 13, 2012, and a savings account on September 16, 2013. He was the only signer on the bank accounts. On July 15, 2016, petitioner signed a Domestic Stock Corporation Certificate of Dissolution, which was filed with the California secretary of state on August 8, 2016.” T. C. Memo. 2022-28, at p. 2.

Luke then told this tale to the RO who came around asking about who did what at the corp so as to determine who was responsible for the unpaid quarters of FICA/FUTA/ITW.

Luke never sent in a Form 12153 when he got the Letter 1153 chopping him with the FTRPs, but tried OIC doubt-as-to-liability.

CJIW (Chief Judge In Waiting) Kathleen (TBS = “The Big Shillelagh”) Kerrigan: “For the first time at trial, petitioner testified that he did not recall receiving the Letters 1153. Petitioner did not raise this issue during his CDP hearing and is precluded from challenging his underlying liabilities here.  See id.; Treas. Reg. § 301.6330-1(f)(2), Q&A-F3.

“Even if petitioner could challenge his underlying liabilities before this Court, his claims would fail. Petitioner does not dispute that he worked for [corp] and was responsible for its bank accounts. He testified that he was the responsible managing officer during the relevant tax periods. During trial petitioner raised the issue that he was coerced by the revenue officer into admitting that he was the responsible person for [corp] on the Form 4180. Even if his claim of coercion was true, it would not affect his status as the responsible person.” T. C. Memo. 2022-28, at pp. 7-8.

Apparently 9 Cir is a Clint Eastwood fan club, because Judge Bea thinks taxpayers should gamble on whether IRS will follow through on its threat to impose condign chops, when the RA’s supervisor finally gets around to checking on what his/her subordinates are up to.

Of course, by that time the bludgeoning of settlements out of terrified taxpayers will long since have taken place.

Here’s Laidlaw’s Harley Davidson Sales, Inc. v. Commissioner, Docket No. 20-73420, 3/25/22, courtesy of my indefatigable colleague and Forbes blogger Peter Reilly, CPA, in whose debt I once again stand. Mr Reilly notes I’ve blogged this case before, but not on this point. He missed my blogpost “Old Bill Wins Another One,” 1/16/20, where I did.

Howbeit, Judge Bea and the 9 Cir panel decided that they are “textualists,” so they go back to the old “assessment” dictionary chaw. 9 Cir forgets that “the letter killeth but the spirit giveth life,” as a far higher authority than 9 Cir put it.

And there’s this gem: “But, at the time RA C sent the [30-day] letter, it could not have been guaranteed that, as the letter stated, if Taxpayer took no action by the June 27, 2011, deadline, ‘we will assess the penalty and begin collection procedures.’ This is because I.R.C. § 6751(b)(1) provides that certain penalties, including penalties under § 6707A, cannot be assessed without written supervisory approval. And, as it turns out, no supervisor had yet provided written approval of the § 6707A penalty that the letter represented would be assessed against Taxpayer.” (Name omitted). Exactly how the taxpayer was to know this is nowhere stated.

Judge, by the time assessment comes, the whole case could be litigated. Section 6751(b) is a drafter’s disaster, but what Congress wanted is clear: a second look, however minimal a second look, before anyone says “penalty.”

Michael Corleone only had to threaten; no one took him up on the threat.

Here’s what I said back in 2016, when the first dictionary chaw case was decided. See my blogpost “A Non-Christmas Story,”12/26/16.

“The answer isn’t in the dictionary, nor in The Oxford English Grammar.

“Either Congress meant that someone, who has oversight responsibility for the IRS employee who chooses to impose a penalty, exercises, and documents the exercise of,  that responsibility before the taxpayer first gets hit with the chop, or they meant something unintelligible from the plain words (without philological gloss) that appear on the page.

“As best I, a mere old-time, beaten-up, beaten-down, single-shingle dirt lawyer ‘of limited experience and mediocre qualifications’ can discern, Congress proposed that IRS stop using penalties to bully taxpayers.

“And the way to do it, said Congress, is to require a second look before dropping the bomb. And that’s a documented second look by a specific individual senior to the would-be bomber.

“If the second look needn’t be given or documented until after a Tax Court litigation, wherein the taxpayer may have paid or incurred monumental legal fees, costs and disbursements, finally to be justified; or worse, where the taxpayer is unjustly mulcted but cannot afford even the “reasonable rates” of Eric William Johnson, Esq., what exactly is the point of the statute?

“Moreover, if the famous ‘second look’ can be accomplished by a robosigner with an illegible signature many years after said initial determination, the statute becomes positively farcical.

“If ever an opinion needed reargument, it’s 147 T. C. 16.”

If ever an opinion needed reargument, it’s Docket No. 20-73420, 3/25/22.

Ch J Maurice B (“Mighty Mo”) Foley announces the retirement of a Tax Court standby, STJ Daniel A (“Yuda”) Guy.

Seems like only yesterday I was welcoming STJ Yuda to the Tax Court Bench. See my blogpost “Welcome, Judge Guy,” 4/24/12.  I did get those “many interesting opinions from STJ Guy,” for which I, and I am sure my colleagues, thank him.

Best wishes to Da Guy.

The proposed revised, improved Tax Court Rules, the capstone of the Chieftainship of Ch J Maurice B (“Mighty Mo”) Foley, will, when adopted (as I hope and trust they will be) at long last bring Rule 147 from 1973 to 1991, if not to 2022.

See my blogpost “The Stealth Subpoena,” 7/16/15.

The new, improved Tax Court Rule 147 will join with FRCP 45 and flow unvexed together, eliminating the rapids caused by the unlamented Stealth Subpoena.

I am sure Judge Mark V Holmes shares my satisfaction.

But why should it take seven (count ’em, seven) years to get here? And why was there not a single channel whereby to make similar beneficial recommendations? I claim no credit for the role, if any at all, that was played by this my blog; it’s read world-wide, but not deeply. I doubt any substantial portion of Tax Court practitioners (to say nothing of IRS personnel, Tax Court staff, or the Judiciary) is aware of its existence.

But if we had a United States Tax Court Bar Association, maybe so it might could just possibly be better.

That’s STJ Eunkyong (“N’Yawk”) Choi’s seal of approval on Joseph Seminara, 12375-20SL, filed 4/1/22. No April fool’s joke this.

Joe self-reported four (count ’em, four) years, but paid nothing. No SNOD, of course, as IRS assessed what Joe reported. NFTL followed via Automated Collection System, untouched by human hands. Joe Appealed the NFTL, asking for an OIC, which he withdrew at the same time his representative did likewise. Then Joe said he’d file another OIC and amended returns, showing he owed nothing and was entitled to a refund. The SO said fuggedaboutit as to amended returns if Joe wanted an OIC, and NODed the NFTL.

In defense of the SO, even if Joe filed for and got an accepted OIC, an NFTL could still be in effect until final payment. And one can file an OIC at any time.

IRS wants summary J and doesn’t get it.

The SO should have considered the amended returns Joe proffered.

STJ N’Yawk Choi: “Where respondent assessed the tax reported in a taxpayer’s return; the taxpayer’s return was not examined under audit, and respondent did not issue the taxpayer a notice of deficiency, the taxpayer has not had a prior opportunity to dispute the underlying tax liability and may do so during the CDP hearing. See Shaddix v. Commissioner, T.C. Memo. 2022-11, *8. The administrative record, in this case, reveals that respondent assessed the tax petitioner reported in his returns;  petitioner’s accounts entered respondent’s Automated Collections System, absent an examination, when petitioner failed to pay the tax he reported on his returns; and petitioner did not receive deficiency notices for any of the taxable years at issue.  Accordingly, reviewing Appeals’ determination de novo, we find that petitioner was entitled to have his dispute of the underlying tax liabilities considered at his CDP hearing. We further find that [SO]’s refusal to consider petitioner’s amended returns was erroneous, and respondent is not entitled to judgment as a matter of law.” Order, at pp. 3-4. (Name and footnote omitted, but read the footnote, or, to save you the trouble of looking up the order on DAWSON, I’ll print it.)

“During the … hearing on the instant motion, respondent asserted that petitioner did not dispute his liability at his CDP hearing because petitioner did not offer amended returns at the [first] telephone conference with [SO], but instead offered them approximately one year later during [a later] telephone conference with [SO]. Respondent asserted that the [first] telephone conference alone was petitioner’s CDP hearing; that petitioner cannot indefinitely raise new issues for Appeals to consider. We disagree. ‘A CDP hearing may consist of one or more written or oral communications between an Appeals officer and the taxpayer’ and ‘[a]ll communications between the taxpayer and the Appeals officer between the time of the hearing request and the issuance of the determination notice constitute part of the CDP hearing.’ Turner v. Commissioner, T.C. Memo, 2010-44, *2 (internal citations omitted).” Order, at p. 4, footnote 2.

For Shaddix, see my blogpost “A Bad Day for Appeals,” 2/28/22.

Judge Christian N. (“Speedy”) Weiler shows some fancy footwork in an improvements-out conservation easement. Jonathan M. Gallant & Sarah D. Gallant, Docket 14875-20, filed 3/31/22, has IRS trying to “…bring our decision in Coal Property Holdings to an illogical conclusion; namely, that no right of use or ownership in future improvements may be retained by the donor. However, we have never held that retaining rights to improvements in the donated property, ipso facto, violates the ‘granted in perpetuity’ requirement.” Order, at p. 5.

Besides, the property had zero improvements when the easement was granted, and the improvements Jonathan and his partner wanted to make were “… to construct trails and footpaths on the property, install signs and other marks,  construct low impact amenities, maintain and manage the property to prevent erosion, and install picnic tables and benches.” Order, at p. 5.

So maybe the easements had minimal value, which could be ignored in case of judicial extinguishment.

But that’s a question of fact. And that needs a trial. Wherefore IRS’ motion for summary J goes south (and of course the property is more GA scrub).

So Hewitt and Oakbrook and Reg. Section 1.170A-14(g)(6)(ii), the latest “goofy” regulation, go by the boards. And Jonathan’s and partner’s amendment to the deed nunc pro tunc to try to comply with the goofy regulation is off the menu. Judge Speedy Weiler catalogs all the cases that he needn’t consider.

IRS does get summary J they satisfied the Section 6751(b) Boss Hossery, because Jonathan and partner didn’t contest that.

I guess I was right when I cognomened Judge Weiler; he sure is speedy.