I just got done with an online CLE concerning the new form of New York State Statutory Short Form Power of Attorney. Don’t worry, I’m not posting about that. I write for an international readership, the greatest part of whom could have no interest in that topic.

But the CLE put me in mind of the well-worn CLE panoply of presentations about winning one’s case anywhere but in the courtroom. Scrolling through today’s Tax Court orders (there being, as usual, no opinions on Friday), I came upon Judge Patrick J. (“Scholar Pat”) Urda’s disposition of the motions in limine that set up my blogpost “Win Your Case Anywhere,” 4/1/21.

You can read all about it in Bernand T. Swift, Jr. & Kathy L. Swift, Docket No. 13705-16, filed 6/11/21.

Judge Scholar Pat lets the parties try to put in, or rule out, whatever evidence might be at issue, and lets it all in, after cross-examination. Much of the fighting went to the weight to be accorded the evidence, rather than admissibility. Evidence may be admissible without being probative or conclusive. Remember the old Tokarski rule: “…we are not required to accept the self-serving testimony of petitioner or that of his mother as gospel.” 87 T. C. 74, at p. 77. Maybe not “gospel,” but they did get to testify.

A source tells me that KJ, who featured in my blogpost “No Comment – Redivivus, ” 2/2/21 took my comments in good part. I’m glad. The place to try, and maybe even win, your case, is in the courtroom.

No, not the pride of the St. James Gate Brewery, Dublin, best had at The Galway Hooker public house in Heuston Street Railway Station (eleven minute walk from the brewery; the nearest pub, freshest draft. Trust me.). The statistical empire the brew inspired forms the predicate for today’s episode of Gregory J. Podlucky & Karla S. Podlucky, Docket No. 435-17, filed 6/10/21.

Greg’s been here before, of course; I get ’em all, every wit, wag, wiseacre, wiseguy, and rounder swims into my ken, eventually. See my blogpost “Work Ethic,” 6/26/19.

You’ll note that it’s been a while since Greg was here. Judge Albert G (“Scholar Al”) Lauber explains. “In 2009 petitioner husband was indicted in the U.S. District Court for the Western District of Pennsylvania for mail fraud, conspiracy to commit money laundering, and attempting to evade or defeat tax for 2003-2006, in violation of I.R.C. § 7201. In 2011 petitioner husband pleaded guilty to these charges. He was sentenced to a lengthy term of imprisonment.” Order, at p. 1. So Greg’s Tax Court trial has been continued (that means “adjourned,” to  us State courtiers) a couple times (hi, Judge Holmes), because of Greg’s incarceration.

But Greg has nowise been idle. Like other residents of slammerdom, Greg just churns out frivolities; apparently he has little else to do. “Largely because of these gratuitous filings, the docket in this case already has more than 180 entries.” Order, at p. 2. Why not? If the maximum Section 6673 frivolity chop is $25K, your total deficiencies plus fraud chops are north of $8 million, and you’ve got plenty of time on your hands, you might as well seek an entry in Guinness World Records for whatever year you get out of the clink.

You can read Greg’s further productions for yourself. Greg has apparently cruised every protester-defier site, mastered drag-and-drop, and keeps on rolling along.

Meantime, Judge Scholar Al bounces Greg’s latest production (number 181), with a warning that maybe should have been given before now. “I.R.C. § 6673(a)(1) authorizes this Court to require a taxpayer to pay to the United States a penalty of up to $25,000 if it appears to the Court that the taxpayer has instituted or maintained proceedings “primarily for delay” or has taken a posi-tion that “is frivolous or groundless.” Petitioner husband’s submissions to this Court to date have included numerous frivolous statements and positions. We warn petitioner husband that he risks a significant penalty if he continues on this path. See, e.g., Briggs v. Commissioner, T.C. Memo. 2016-86 (imposing penalty of $3,000); Balice v. Commissioner, T.C. Memo. 2015-46 (imposing penalty of $25,000).” Order, at p. 2.

I don’t know why I didn’t blog Briggs, but I can’t find the T. C. Memo. on Google, and the DAWSONized Tax Court website is, as usual, utterly worthless; there is no way to search for opinions. For the story of Mike Balice, see my blogpost “The Jolly Rounder,” 3 /16/15.

What price a $25K chop when Guinness immortality is in view?

Edited to add, 7/21/21: Stephen H. Briggs and Patricia S. Briggs, 2016 T. C. Memo. 86, filed 5/2/86, is online at last. Turns out Steve and Pat were in Tax Court back in 2014, protesting, and got chopped with $500 “as a warning.”

That is not what you want your client to say when he’s seeking abatement of interest on a liability for which he requested credit from an overpayment, but received a refund check instead. Especially when your client has taken a Section 7201 fall for tax evasion. And even more so when your client is on the PDT list; see IRM 25.4.1.1.1 (Oct. 31, 2018).

Spoiler alert- PDT means “potential danger to IRS employees.”

Michael J. Hogan, Docket No. 11229-15, filed 6/9/21, has been around Tax Court before in the days before I launched this my blog. This time he wants Section 6404 abatement. He claims IRS says it made no mistakes.

Judge Buch agrees with MJ that IRS did make mistakes, but none has risen to the level of unreasonable delay. And MJ stiped that the refund check he got, rather than the credit against liability he requested, was OK by him.

Putting MJ on the PDT list isn’t enough. “He did not establish that there was an error in designating him as a PDT. Even if that were erroneous, he did not establish that the designation caused any error, delay, or additional interest. And given his repeated efforts to avoid payment, he clearly did not establish that he would have paid his tax earlier.” Transcript, at p. 16.

If you get a refund check when you wanted a credit, send back the check with a clear and concise statement of what liability you want credited. Testifying at trial “I sat on it,” Transcript, at p. 18, does not help your client’s cause.

But need I add MJ was pro se?

You really could have seen this coming after Judge Goeke denied his discovery request last September. So, no surprise, there’s no whistleblower award for 10084-16W, 2021 T. C. Memo. 73, filed 6/9/21. For the discovery joust, see my blogpost “Raise High the Beam,” 9/29/20.

OK, so the SEC filing is a broken reed. LBI’s SME says Blower84’s info didn’t lead to the big grab IRS got from target (not the department store, the alleged bad dudes). Judge Goeke walks us through the giant slalom that Blower84’s info traveled, but at the end, all Blower84 had was the SEC 10-K that said target paid $170 million to “taxing authorities.”

Judge Goeke: ” As we stated in our order denying petitioner’s motion to compel, petitioner’s allegations relating to the 2010 settlement are speculative and based on a highly improbable timeline under which respondent would have needed to use the information received in June 2010 to audit the target, make a determination, and assess tax which the target paid before November 2010. This theory is so implausible that it does not justify the supplementation of the administrative record.” 2021 T. C. Memo. 73, at p. 12.

But IRS, like me, loves summary J, although Tax Court frowns thereon. Whistleblower cases are decided on the administrative record; there’s no trial.  If the record is incomplete, IRS can supplement, and the blower can demand other matter, which IRS saw but left out of the record, be inserted. But it doesn’t matter here.

I can’t remember the last time a blower won in Tax Court.

Michael B. McCullough, Docket No. 10636-19, filed 6/9/21, shoots the rapids of the “goofy regulation,” carrying with him enough receipts and credible testimony both to sustain the bulk of his COGS and deductions, and to avoid any accuracy chops.

Mike had forty (count ’em, forty) years in as an interior designer. For the years at issue he had his own business, and worked only for customers for whom he’d worked for years.

Judge Kathleen Kerrigan gives us an off-the-bencher, in which she skates through the factors, as Mike was a CA resident when he petitioned, and 9 Cir. maybe doesn’t follow Judge Posner.

“Petitioner had four decades of experience in interior design. His business stemmed from his past experiences and prior relationships. He worked at his interior design business full time. Even though he testified that he did not have a written business plan, he had one in his mind which he executed. His plan was to do projects for prior clients and obtain new work based on client recommendations. From his past experiences, he knew that he could have enough business without advertising.” Transcript, at p. 8.

For a dozen years pre-pandemic, that was how I operated. And I’ll wager a couple ales at Jake’s Saloon that I was not the only one.

“Because we mostly decide for petitioner, we conclude that petitioner is not liable for the section 6662(a) penalty for [years at issue].” Transcript, at p. 9.

I note Mike did discovery and tried the first half of this case his own self, but brought in counsel for the rest. Good move, Mike. Good Job, counsel.

David Andrew Lufkin, Sr., 2021 T. C. Memo. 71, filed 6/8/21, finally got the CDP for which IRS was whistled when they sent the NITL to the ineligible receiver. See my blogpost “Ineligible Receiver,” 9/22/14. IRS said they’d reissue the NITLs and send them to the right place, and they did.

David Andrew claims SOL, but there was enough tolling between his multiple Ch. 7s, and his various trips to Tax Court, so that Judge Travis A. (“Tag”) Greaves can opine “… even under a conservative calculation, more than 10 years had not elapsed on the applicable periods of limitations for the Form 941 liabilities when respondent issued the CDP notice in 2014.” 2021 T. C. Memo. 71, at pp. 10-11. And laches (delay of the game) cannot succeed against the gov’t without more evidence than David Andrew adduces.

David Andrew’s claim that someone else took over the business (practice?) can’t shield him from pre-transfer liabilities. Sounds like the ineligible receiver is still ineligible.

“Petitioner produced no substantive evidence establishing how another entity or person was either liable for the Form 941 liabilities or submitted payments to the IRS for the liabilities. He alleged that in 2000 respondent seized the documentation necessary to prove his claim, but that respondent either lost or destroyed this documentation following the purported seizure. In effect, petitioner asks us to relieve him of his burden of proof and overlook his failure to offer any evidence as to this issue. We decline to do so. See Am. Police & Fire Found., Inc. v. Commissioner, 81 T.C. 699, 706-707 (1983) (finding that the taxpayer’s burden of going forward with the evidence did not shift merely because the Commissioner unintentionally lost the taxpayer’s records); Malinowski v. Commissioner, 71 T. C. 1120, 1125 (1979) (same).” 2021 T. C. Memo. 71, at pp. 7-8.

David Andrew reprises this argument when fighting over the SO’s verification that all necessary steps were taken per Section 6330(c)(1).

“… petitioner repeatedly alleged that respondent’s supposed destruction of all records pertinent to the Form 941liabilities amounted to a violation of procedural due process under the Thirteenth Amendment to the Constitution. Petitioner failed to establish any nexus between his CDP case and the Thirteenth Amendment, which deals exclusively with the abolishment of slavery and involuntary servitude.” 2021 T. C . Memo. 71, at p. 11.

Still ineligible after all these years.

We’ve all seen the standard general releases when a case settles. When attorney malpractice is on the menu, broadform is the plât du jour. Anything and everything, from the beginning of the world to the instant of signing.

We saw how that torpedoes Section 104 physical injury claims. See my blogpost “Would’a,” 2/18/21.

Today Judge Pugh fires a Tax Court longlance into Carol E. Holliday, 2021 T. C. Memo. 69, filed 6/7/21. Carol’s suit involved the common property with her loved-once. Carol claimed her divorce lawyer bulldozed her into a mediated settlement which left her $75K shortstacked. When he moved for a new trial and lost, he promised he’d appeal, but didn’t. So Carol’s next lawyer sued for negligence, gross negligence, deceptive trade practices, treble damages and attorneys’ fees.

Divorce lawyer’s insurer ponies up $175K in full settlement, which malpractice lawyer gets, cuts Carol a check for $101,500, and takes the rest as his fee.

Of course, (a) divorce lawyer sends Carol a $101,500 1099-MISC , (b) Carol reports nothing, (c) IRS hits Carol with a SNOD for the tax on the $101,500, d) Carol claims she got only the property she should have gotten in the marital split, thus no accession to wealth, and (e) IRS ups the deficiency to cover the $73,500 the attorney got, while allowing Carol the miscellaneous itemized deduction therefor and dropping the chops.

True, return of capital is not taxable. But reading the settlement agreement, it’s not clear what Carol got. Her malpractice claim got settled; there’s no admission or assignment of guilt or fault.

“Petitioner argues that the settlement proceeds are only for those claims that involve the marital estate and that they represent compensation for lost value or capital because they ‘are based on her recovery of the property interest that * * * [she] rightfully should have received from her divorce as her share of the marital estate.’ But the settlement agreement says that the settlement proceeds are for the release of  ‘all claims * * * of whatever kind or character, known or unknown * * * which * * * [petitioner] may have against * * * [malpractice defendants] arising out of or related to the * * * [malpractice lawsuit].’ Petitioner thus asks us to look through the settlement agreement and consider only her claims related to recovery of marital property. We decline to look beyond the plain terms of the settlement agreement, and we conclude that the settlement proceeds were to compensate her for her attorney’s malpractice and therefore are taxable.” 2021 T. C. Memo. 69, at pp. 11-12.

Judge Pugh obviously has never been involved in a malpractice litigation. I have been, and I’ve witnessed others. No settling defendant or their insurer will ever itemize, under any circumstances, anything. Every settlement agreement will be in the broadest form human imagination or artificial intelligence can devise. The best petitioner’s counsel can do is put in all the litigation papers, and try to get in expert testimony that no malpractice settlement agreement ever states what was really settled.

And even then, it’s a forlorn hope.

I’m sure all y’all will recall the inventive Glenn R.  Johnston, flogger of cemetery dodges. Well, if you don’t, see my blogpost “Elegy in a Graveyard,” 8/12/14. Among those whose heavy-duty charitable deductions went the way of all cliché, we have today Kannarkat P. Verghese, Deceased, Annie P. Verghese, Personal Representative, and Annie P. Verghese, Petitioners, 2021 T. C. Memo. 70, filed 6/7/21.

Annie was here before, fighting about interest abatement. See my blogpost “Net Worthiness – Part Deux, ” 2/16/21.

The FPAAs (herein consolidated) that followed Glenn’s undoing were put on hold while the Federales put Glenn in the stony lonesome. Now Annie, as pers rep and personally, wants interest abated on the partner-level deficiency thrown off by Glenn’s skullduggery, of which Annie claims she was completely unaware.

Unhappily, Section 6040(b) precludes abatement of income tax interest. So IRS can’t abuse its discretion where it has none.

But that Obliging Jurist, Judge David Gustafson, cuts Annie a wee bit slack on five months’ worth thereof, allowing her some discovery as to whether IRS unreasonably delayed for five (count ’em, five) months. For the rest, the criminal proceedings put the TEFRA litigation and settlement on hold. And most of the continuances were stiped by both sides.

Annie says IRS never told her she could make a deposit of the tax due and stop the running of interest. But lack of a personal invitation isn’t delay, even if Judge Gustafson agrees Annie would’ve paid if invited.

“We first address petitioners’ argument that the Commissioner’s failure to inform them of the opportunity to suspend the running of interest by making a ‘deposit’ constituted an act of ‘delay’ within the meaning of section 6404(e). SO E found no evidence that such a “failure” occurred, and moreover concluded that ‘the statute doesn’t provide for interest abatement when the IRS doesn’t advise the Taxpayer to post a bond.’ Although (as we have assumed) the Commissioner did not specifically advise petitioners of the opportunity to post a cash bond, the IRS has since 1984–long before the years at issue–published guidance advising all taxpayers of the opportunity to remit to the IRS a deposit in the nature of a cash bond and (relevant here) has also advised how to do so before the assessment of the tax upon which interest may be assessed. The accrual of such interest could be reduced or eliminated by following those procedures. See Rev. Proc. 84-58…, and other published guidance…. Because this information was available to the public, petitioners’ failure to make a deposit to halt interest accrual cannot be attributed to delay or failure of the IRS to advise them personally of this information. The supposed absence of a personal invitation to make a deposit did not give rise to an abuse of discretion when SO E determined that section 6404(e) does not provide for interest abatement under such circumstances.” 2021 T. C. Memo. 70, at pp. 44-45. (Name, citations, and footnote omitted). Note Rev. Proc. 84-58 was superseded by Rev. Proc. 2015-18.

I suspect whoever was Annie’s counsel at the time will be getting The Phone Call. I suggest to my readers that they give a copy of the cited Rev. Proc. to their clients at retention; it will save one part of The Phone Call.

As for the holdup during the criminal proceedings, that wasn’t ministerial or managerial but discretionary, and anyway, litigation delay of itself isn’t grounds for abatement.

But once the criminal and the TEFRA litigations were done, IRS did move for entry of decision, withdrew that, and refiled, hence the five-month delay. SO E apparently didn’t check that out, so maybe discovery will sort that out.

Finally, some three months were consumed with the Rule 248(b) sitout for nonparticipants. See my blogpost “Settle Order on Notice – to the Nonparticipant,” 10/26/17.

So Annie loses most of the interest (which by now is more than the deficiency).

As is not uncommon, a footnote shows interesting sidelight. We all know that Golsen mandates Tax Court to follow CCA precedent where taxpayer resided at petition in a jurisdiction subject to that Circuit. But that’s not a jurisdictional bar. “see also Lardas v. Commissioner, 99 T.C. 490, 495 (1992) (explaining Golsen v. Commissioner, 54 T.C. 742 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971), and stating ‘[i]t should be emphasized that the logic behind the Golsen doctrine is not that we lack the authority to render a decision inconsistent with any Court of Appeals (including the one to which an appeal would lie), but that it would be futile and wasteful to do so where we would surely be reversed’).” 2021 T. C. Memo. 70, at p. 18, footnote 6. (Underlining by the Court). But nothing stops counsel from taking an appeal and arguing in good faith that precedent is wrong.

Islanders

CSTJ Lewis (“Delightful Name”) Carluzzo has to protect the Section 6105(a) confidential tax convention information that gave rise to the Memorandum of Understanding (MOU) between IRS and the Virgin Islands Bureau of Internal Revenue (VIBIR). This document has featured again and again this my blog; from the late Appleton to the peripatetic Ventos to the Coffey break, it’s been the gift that keeps on giving. This blogger has been an unintended beneficiary of the now-extinct Congressional largesse to Our Insolvent Islands in the Sun.

And who is on the receiving end of CSTJ Lew’s gag order today, but counsel for that well-known bamboozler Dewayne Bridges, et al., Docket No. 26519-16, filed 6/7/21? For Dewayne’s backstory, see my blogpost “The Reconsidered Bamboozle,” 11/12/20.

Only counsel and those expressly permitted by IRS can cast an eye on the magic documents. Dewayne and his buddy Steve can’t look.

The Rawat Gambit

A year ago I queried IRS counsels’ use of “attachments in the nature of evidence”, which I’ll call the Nature gambit, whereby IRS counsel tries to wild-card into evidence that which may or may not pass FRE muster, specifically to ask why petitioners are not afforded like treatment. See my blogpost “Discussion, Deliberation,” 6/24/20.

Well, today Kiran Rawat plays what I shall call the Rawat variation on the Nature gambit, in Kiran Rawat, Petitioner and Raghvendra Singh, Intervenor, Docket No. 11350-18, filed 6/4/21.

And Judge Gale doesn’t toss the Rawat variation on the Nature gambit with a curt “Save it for the trial,” as so many other petitioners receive. Zoomietrial is on for next week.

“…the Court received a mailing from petitioner postmarked May 28, 2021, that includes the following: (1) a three-page document labeled ‘Response to Pre-Trial Memorandum For Respondent’;1 and (2) a four-page document labeled ‘Plaintiff Exhibit A’. Our review of ‘Plaintiff Exhibit A’ reveals that it consists of what appear to be copies of four pay stubs (two of which appear to be identical) issued to petitioner by her employer for certain two-weekpay periods….” Order, at p. 1.

IRS counsel of course yells that Kiran blew the discovery deadline Judge Gale set back in February; all documents to be exchanged by May 21.

Judge Gale has nothing to say about why a seven (count ’em, seven) day delay might prejudice IRS.

But Kiran’s gambit doesn’t get her home free neither.

Judge Gale does order “…the Clerk of the Court shall file pages one through four of ‘Plaintiff Exhibit A’, together with a copy of the ‘Declaration of Service’ and the envelope in which the foregoing documents were mailed, as petitioner’s Proposed Trial Exhibits,” Order, at p. 2.

But Kiran should be warned. IRS is still in the game.

“…petitioner is advised that…the pay stubs have not yet been received into evidence. Whether they are received into evidence at trial will depend upon the extent to which respondent was prejudiced by petitioner’s failure to provide them to respondent on a timely basis.” Order, at p. 2.

Taishoff says:

(1) Maybe also hearsay. And anything else IRS counsel can come up with.

2) Is this gambit worth trying? It depends. What’s your case (innocent spousery with a sympathetic petitioner is better than a SNOD with a rounder-protester)? By how much did you blow the discovery deadlines? Have you maybe some kind of excuse? What’s the evidence (true gamechanger or just cumulative)? Is IRS counsel truly ambushed, or can you argue they aren’t? And if you do try it, please let me know how you make out.