The late George M. Cohan is as popular today with taxpayers and their counsel as ever he was when giving his regards to Broadway a century ago. Today ol’ George is on the road from PA to GA, as Forrest Crawley and Shawna Crawley, 2021 T.C. Sum. Op. 37, filed 11/16/21*, get most of what they paid to the “mom-and-pop” moving company, whose name and from whom receipts for $20K in cash are missing on the trial of Forrest & Shawna’s Section 217 moving expenses deduction.

No question Shawna moved the fifty miles or more for her job, or that she stayed the 39 weeks. Forrest followed when the kids left school, and they did drive “a boat, a four wheeler, four dirt bikes, three motorcycles, and two cars” down to the Peach State their own selves. 2021 T. C. Sum Op. 37, at p. 3.

The mon-and-pop movers’ receipts vanished between Shawna in the family RV and their purchase of a home, but Cohan to the rescue. Shawna did cash out her employer’s stock in the right amount at the time of the move, and Forrest and Shawna had credit card receipts for gas. Forrest also testified precisely as to when and what was moved.

Forrest & Shawna went to the internet for an article discussing the expenses of a move such as theirs, but Judge Wells is unimpressed.

“We give little weight to the article petitioners provided, but we do give it enough weight to corroborate that travel expenses below $2,000 and a cost of $20,000 to pack, move, and unload the contents of a 3,500-square-foot house, a boat, a four wheeler, four dirt bikes, three motorcycles, and two cars are reasonable.” 2021 T. C. Sum. Op. 37, at p. 8.

*Crawley 2021 T C Sum Op 37 11 16 21

It isn’t only IRS who fits that bill.

William E. Ruhaak, 157 T. C. 9, filed 11/16/21*, although once whanged with a $5K Section 6673 friovolity chop, followed by a $750 hit from 7 Cir for appealing same, is an inventive sort. He timely files Letter 12153 in response to the latest NITL, but asks for an equivalent hearing.  He tells the SO he wants to put in a “statement of conscience” why he doesn’t pay taxes.

Judge Gale reckons Wm E is avoiding getting chopped in a CDP by seeking an equivalent hearing. “Although petitioner’s testimony and the other materials in the record are not clear on this point, it appears that one reason petitioner might have desired an equivalent hearing may have been to avoid the $5,000 penalty under sec. 6702(b) for making a ‘specified frivolous submission’. The penalty applies to a CDP hearing request if any portion of the request ‘is based on a position which the Secretary has identified as frivolous’ or ‘reflects a desire to delay or impede the administration of Federal tax laws.’ Sec. 6702(b)(2)(A), (B)(i). However, the IRS will not impose the sec. 6702(b) penalty when a taxpayer has not timely requested a CDP hearing and has instead requested an equivalent hearing. See Internal Revenue Manual (IRM) pt. 5.1.9.3.16(1) (Feb. 7, 2014) (current version at IRM pt. 5.1.9.3.15(1) (Aug. 27, 2021)).” 157 T. C. 9, at pp. 9-10, footnote 6.

But Wm E is timely for a CDP, and despite his protests, that’s what he got. Judge Gale finds the SO didn’t have to give Wm E a short delay in the CDP hearing because all he was going to do is frivol again.

True, the Letter 12153 form has a check-the-box for equivalent hearing as well as CDP. But Judge Gale says the equivalent hearing can be had only if the application comes after the 30-day window for a CDP has closed, even though a Q&A in the Regs might be read otherwise in isolation. But Judge Gale is never isolated.

“We therefore must construe section 301.6330-1(i)(2), Q&A-17, Proced. & Admin. Regs., in the context of the referenced provisions of paragraph (i). Paragraph (i) provides in relevant part: ‘A taxpayer who fails to make a timely request for a CDP hearing is not entitled to a CDP hearing. Such a taxpayer may nevertheless request an administrative hearing with Appeals, which is referred to * * * as an ‘equivalent hearing.” Sec. 301.6330-1(i)(1), Proced. & Admin. Regs. (emphasis added). The phrase  ‘[s]uch a taxpayer’ limits the class of taxpayers who may request an equivalent hearing to those described in the immediately preceding sentence, that is, those who ‘fail[] to make a timely request for a CDP hearing’. In other words only those taxpayers who fail to timely request a CDP hearing are eligible to request an equivalent hearing. Logically, a taxpayer cannot yet have failed to make a timely request for a CDP hearing before the 30-day period for requesting a CDP hearing has expired. Paragraph (i)(1) of section 301.6330-1, Proced. & Admin. Regs., thus renders a taxpayer ineligible to request an equivalent hearing during that 30-day period. In that context, section 301.6330-1(i)(2), Q&A-17, Proced. & Admin. Regs., merely explains that once the 30-day period ends and a taxpayer becomes eligible to request an equivalent hearing, the taxpayer must make any request for an equivalent hearing within the remainder of the one-year period commencing on the day after the date of the levy notice.” 157 T. C. 9, at pp. 19-20.

But Wm E gets a bye on the Section 6673 chop.

“In view of the fact that the Court has previously sanctioned petitioner under section 6673(a)(1), see supra note 5, and respondent warned in his pretrial memorandum that he would seek a section 6673 penalty if petitioner advanced any frivolous arguments, we consider whether such a penalty is also appropriate in this case. * * * * The principal position that petitioner advanced in this case is that he was entitled to an equivalent hearing (rather than a CDP hearing) because he had made the request ‘within the one-year period commencing the day after the date of the CDP Notice’ as provided in section 301.6330-1(i)(2), Q&A-17, Proced. & Admin.  Regs. As our preceding discussion illustrates, this position was not frivolous because section 301.6330-1(i)(2), Q&A-I7, Proced. & Admin. Regs., when read in isolation, was susceptible of the interpretation petitioner placed on it. We therefore will not impose a section 6673 penalty on petitioner in this case.” 157 T. C. 9, at pp. 25-26.

But Judge Gale strongly admonishes Wm E not to try frivoling again.

Still and all, though I’m no fan of frivolites, I gotta give Wm E a Taishoff “Good Try, First Class.” By sliding in the equivalent hearing request while the CDP clock is running, he manages to get a stay of collection while the CDP is pending and while his Tax Court petition is pending. Even better, he ducks a Section 6673 frivolity chop for this maneuver.

*Wm E Ruhaak 157 T C 9 11 16 21

As the radio announcers calling baseball games would tell the box score-marking fans, I’ve got the latest docket number from the US Tax Court website this date at 3:50 p.m. Eastern Time: 30604-21.

I predicted exactly a month ago that we’d see 32,000 petitions filed this year. We’re right on track. See my blogpost “26822-21,” 10/15/21.

I commented the other day on Excelsior Aggregates, LLC. See my blogpost “Unequivocal,” 11/4/21.

Excelsior is one of twelve (count ’em, twelve) conservation easement partnerships under the Big Escambia Ventures TMP umbrella. Excelsior is stipulated as the test case for the Escambia 12, the remaining eleven being all-in with Excelsior.

Excelsior went off on IRS’ decision to chop the appraiser per Section 6695 not being the first communication of chops to Excelsior. I called IRS (and incidentally Judge Albert G (“Scholar Al”) Lauber) on that, because the RA’s “agenda” sent to the Escambians’ counsel said “maybe chops, call me.” That’s Class A weasel-wording. The “agenda” was the first communication. An RA casually mentioning chops is exactly the kind of threatening Congress designed Section 6751 to prevent.

Today Judge Scholar Al nails Knat Creek, LLC, Big Escambia Ventures, LLC, Tax Matters Partner, Docket No. 7637-19, filed 11/15/21*. The Knats also played the Section 6695 appraiser chop gambit, and they lose partial summary J. Now I haven’t read the papers, so I can’t tell how hard, if at all, Excelsior or Knat hit the “agenda” issue. Maybe so the distinction between taxpayer and appraiser wins the day, because the “agenda” argument wasn’t properly raised.

But I would argue Section 6751(b) is a remedial statute, and should therefore be broadly applied. IIRC, even the august ABA Tax Section protested at the threat of chops being used to coerce taxpayers with meritorious claims to fold, causing Congress to enact the 1998 amendment.

I find this Excelsior pattern disturbing. Today Tax Court strains out the Knat but swallows the camel, as a much more exalted Authority put it.

*Knat Creek LLC 7637-19 11 15 21

Edited to add, 11/16/21: I reached out to one of the attorneys for Knat Creek, but he declined to comment. Though as an attorney I approve of not trying cases in the media, as a blogger I find this commendable reticence frustrating.

A dear friend, who is an Episcopal priest, has retired three (count ’em, three) times, and continues to serve as an assistant priest in his eightieth year. Is eighty the new sixty-five?

While Section 7447(b)(1) sets 70 as mandatory retirement for Tax Court judges, Sections 7447(b)(4) and 7447(c) allow for retired judges to take on senior status, in a fine example of “the large print taketh away, but the fine print giveth.”

So while Judge David Gustafson is not yet 70, should he at that age elect to retire from the Tax Court bench (which I hope he does not), he can always, if he chooses, find work as a kindergarten teacher.

Here’s an example: Inderpal S. Kanwal & Harpreet K. Kanwal, et al., Docket 23766-18, filed 11/12/21.*

“…the parties filed in each of these consolidated cases a First Stipulation of Facts, consisting of paragraphs numbered 1 through 101. On the same date they filed in each case a joint status report that states they ‘anticipate[d] filing a Second Stipulation of Facts and their respective cross-motions for summary judgment no later than November 17, 2021.'” Order, at p. 1.

As good as their word, the Kanwals filed a Second Stipulation of Facts, consisting of paragraphs numbered 1 through 3. Judge Gustafson expressed his appreciation of the parties’ cooperation and their work in readying their cases for disposition.

Gold Star?

Not quite.

He orders “…the Second Stipulation of Facts (Doc. 28), because the numbering of its paragraphs results in numbers that duplicate those in the First Stipulation of Facts, is deemed stricken, and that the parties shall file a revised Second Stipulation of Facts the paragraph numbers of which are sequential after the First Stipulation of Facts. If the parties hereafter file any additional stipulations, then they shall number the paragraphs therein sequentially after the previously filed stipulations.” Order, at p. 1.

Takeaway- Make it easy for the judge. Make it real easy for the judge.

United States Tax Court is closed today, 11/11/21. I therefore confine myself to marching once again.

Some gave little, some gave much, some gave all.

Remember them.

William Howard Peak, 2021 T. C. Memo. 128, filed 11/10/21*, takes his text from George and Ira Gershwin’s 1937 hit, when he claims the Notice CP12 made a deal between IRS and him, allowing him to duck tax on about $13K in 1099R money.

Judge Tamara Ashford, while sympathetic toward Wm H’s “…alleged financial straits, we have no authority to disregard the express and unambiguous wording of the statutory provisions.” 2021 T. C. Memo. 128, at p.8, footnote 5.

The CP12 corrected a math goof relating to Wm H’s Social Security and tax computation, told him, if he didn’t object to the new math, to expect a $182 refund within four to six weeks “as long as you don’t owe other tax or debts we’re required to collect.” 2021 T. C. Memo. 128, at p. 8.

Wm H says he has a deal with IRS, and the SNOD hitting him for the untaxed 1099R money is invalid.

Judge Ashford: “A Notice CP12 is not, however, a settlement agreement. A settlement agreement ‘is in all essential characteristics a mutual contract by which each party grants to the other a concession of some rights as a consideration for those secured’.

“No concession of rights or consideration was exchanged by the IRS and petitioner through the… Notice CP12. A Notice CP12 is issued as a first notice to inform the taxpayer of a math error on an individual return that changes the refund amount claimed on that return. Internal Revenue Manual (IRM) pt. 21.3.1.5.8(1) (Sept. 12, 2017); see also IRM pt. 3.14.1.6.12 (Jan. 1, 2017). The …Notice CP12 that the IRS sent petitioner did just that…..” 2021 T. C. Memo. 128, at p. 9 (Citations omitted).

Besides, “(P)ursuant to section 6501(a), the IRS is authorized to assess any additional Federal income tax with respect to a filed Federal income tax return within three years after the return is filed. As the IRS sent petitioner the January 6, 2020, notice of deficiency well within that three-year period of limitations, it was not unlawful for the IRS to do so after sending petitioner the… Notice CP12.” 2021 T. C. Memo. 128, at p. 10.

Wm H claims he got erroneous advice from the IRS helpline, but that doesn’t help. IRS can always correct errors of law.  

Settle your case with a CP12? Nice work if you can get it, but as Ira said “And if you get it won’t you tell me how?”

*William Howard Peak 2021 T C Memo 128 11 10 21

I’ve covered the Hidden Spouse trick before now, but today we’ve got ex-Ch J. Michael B (“Iron Mike”) Thornton applying higher mathematics to valuing the gift made by Louis (“Forgive the Spelling”) P. Smaldino, 2021 T. C. Memo. 127, filed 11/10/21,* to Mrs. Lou.

Turns out the gift of 49% of membership interests in Lou’s family LLC to Mrs. Lou, using Mrs. Lou’s $5.2 million gift tax exclusion to try to dodge gift tax when Mrs. Lou immediately hands a large part of the goodies over to Lou’s kids’ Dynasty Trust, gets blown up via substance-over-form, looking family gift equines in orifices other than oral. Lou handed Mrs. Lou $8 million worth of the outfit that ran his real estate empire, but ex-Ch J Iron Mike knocks that down to $7 million via guaranteed payments to Lou from LLC.

Estate planners should read LLC operating agreements before devising gifting plans; ex-Ch J Iron Mike did read the OA, and found missteps in the execution. But query, would doing it right here have helped Lou’s cause any more than remove a make-weight argument?

Finally, there’s the usual mix-and-match between valuations, with IRS’ guy beating out Lou’s by a couple lengths (hi, Judge Holmes). Such arcana as Section 2701 is in play; I leave this to specialists.

Practice hint- Don’t backdate assignments of interests or memberships to dates prior to the date of the appraisal, which fixed the amounts assigned to the penny four (count ’em, four) months after the alleged assignments. These fill-it-in-later moves rarely if ever work.

*Loiuis P Smaldino 2021 T C Memo 127 11 10 21

Once again, the APTC erects a tollbooth after the much-contemned Affordable Care Act has provided “access to and delivery of health care services.” Caught by the descending bar today are Ronald E. Knox and Joan S. Knox, 2021 T. C. Memo. 126, filed 11/9/21*.

Ron and Joan got some Social Security lumps, the good kind that come by check. They apparently took a Section 86(e) election and left those off their MFJ 1040; and of course never filed the Form 8962 reconciliation. Adding back the out-dollars from Social Security, Ron and Joan are at 461% of applicable poverty, which  makes the $7’K APC taxable.

Judge Courtney D (“CD”) Jones delivers the bad news.

“Mr. and Mrs. Knox seek equitable relief as have many petitioners caught in this unfortunate circumstance. While we are sympathetic to their plight, we cannot ignore the law to achieve an equitable end. Mr. and Mrs. Knox received an advance of credit to which they were not entitled and are liable for the $7,332 deficiency. Accordingly, we sustain respondent’s determination.” 2021 T. C. Memo. 126, at p. 10. (Citations and footnote omitted, but Tax Court turns to IRS counsel to provide access to and delivery of collection alternatives).

“We direct respondent’s counsel to include alternative payment possibilities for this deficiency in any subsequent correspondence with the Knoxes.” 2021 T. C. Memo. 126, at p. 10, footnote 5.

*Ronald E Knox and Joan S Knox 2021 T C Memo 126 11 9 21

But Always Time to Do It Over

STJ Diana L (“The Taxpayers’ Friend”) Leyden bucks a conjoined pair of SO flubs back to Appeals, and tells Appeals to put a single SO on both, in Stephen L. Barkan and Janice Barkan, 16625-19L, filed 11/8/21*, and 18595-19L,* of even title and date therewith. I’ll refer only to 16625-19L herein.

A couple interesting procedural oddities (hi, Judge Holmes) are found early in 16625-19L. IRS moves for summary J. “The record does not indicate why respondent provided a declaration from a respondent’s counsel rather than from the settlement officers who conducted the CDP hearings.” Order, at p. 2, footnote 4.

And there were two (count ’em, two) CDPs, each with a different SO for different years, and each SO apparently unaware of the existence of the other. So the record is sufficiently tangled to make STJ Di unable to ascertain whether Steve and Jan had a chance to challenge underlying liability (the issue here is underpaid and late-filed self-reporteds, so no SNODs).

Even Steve’s and Jan’s trusty attorney was so confused as to which SO was dealing with what, that he never filed a response to the motion for summary J. After reading this tangle, I don’t blame him.

STJ Di: “There is a genuine dispute as to whether petitioners disputed their underlying liabilities for tax years 2011, 2012, 2013,[SO R] and 2016 [SO J] during their two CDP hearings, given that both petitioners’ counsel and the SOs assigned to each CDP hearing were seemingly unaware that the Appeals Office was working multiple CDP levy cases for petitioners with different SOs and tax periods. Due to this confusion, the record is unclear as to whether petitioners disputed their underlying liabilities during their CDP hearings for the tax years in issue, which is a material fact. Therefore, summary adjudication is not appropriate at this time.” Order, at p. 6.

As for the declaration of counsel in place of one by an SO or two in support of a motion for summary J, there might be a reason. The rule we learned in Civil Procedure 101 is that the affidavit or declaration of an attorney with no personal knowledge of the facts therein alleged is worthless. But if there truly are no material facts in dispute, those undisputed facts are readily discernable from documents exchanged and undisputed by the parties, and copies of all thereof are attached to the declaration or affidavit, then counsel’s declaration is only a table of contents or document transmittal sheet.

Here, obviously, that isn’t the case.

*Stephen L. Barkan and Janice Barkan, 16625-19L 11 8 21

*Stephen L. Barkan and Janiuce Barkan 18595-19L 11 8 21