Attorney-at-Law

Archive for the ‘Uncategorized’ Category

ONE OR THREE

In Uncategorized on 06/06/2019 at 16:17

No, not Sam T. Coleridge’s “greybeard loon” having a mix-and-match. This is a designated hitter from Judge Buch off a CDP, John M. Annesi & Cheryl L. Annesi, Docket No. 988-18L, filed 6/6/19.

The major wrangle here is John’s & Cheryl’s RCP. IRS wanted to grab $92K, John & Cheryl offered an ETA OIC of $2500, which got bounced when the OIC offer specialist decided that they had a $385K RCP, based on their most recent return.

I’ll let Judge Buch take it from here.

“To determine their RCP, the offer specialist relied on information from the Annesis’ most recently filed return and calculated their monthly income based on this one year of income. The offer specialist rejected the Annesis’ offer-in-compromise because she concluded that the Annesis were able to pay the liability in full and that their special circumstances did not warrant a hardship.

“The offer-in-compromise was sent to a settlement officer for the Annesis’ appeal of the offer specialist’s decision. During the hearing with the settlement officer, the Annesis’ representative would not accept an installment agreement because she asserted that the Annesis were unable to make the payments. After the hearing, the Annesis’ representative sent a fax to the settlement officer, asserting that the Internal Revenue Manual allows for the past three years of income to be averaged in calculating the Annesis’ monthly income to determine their RCP.” Order, at p. 2.

One or three, it’s all one. On the three-year recount, the SO comes up with a $198K RCP.

“While the parties do not dispute the liability, the Annesis attempt to raise doubt as to collectability by claiming the Commissioner incorrectly calculated their RCP. The Commissioner may reject an offer-in-compromise when the taxpayer’s RCP is greater than the amount he proposes to pay. Here, the Annesis’ proposed calculation method results in a RCP that far exceeds their offer amount. Therefore, the alleged error is immaterial and the Commissioner did not abuse his discretion.” Order, at p. 4. (Footnotes omitted, but note the cases cited.)

I give the Anchorage AK representatives a Taishoff “Good try, second class.”

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AN EDUCATION

In Uncategorized on 06/06/2019 at 15:56

Maria Shenorah McCree, 2019 T. C. Memo. 67, filed 6/6/19, definitely spent money from her TX Employee Retirement System withdrawal for qualified higher education expenses. And though Maria Shenorah is on the sunny side of 59-1/2, she still gets the benefit of exemption from the 10% addition/tax/whatever to the extent such expenses were incurred, net of scholarships and grants. And Judge Vasquez assists in her higher education.

Maria Shenorah claimed rollover for the whole withdrawal, although she didn’t. She put the withdrawal in a regular bank account, and that triggers tax. And though IRS, notwithstanding the Letter 4464C Questionable Refund 3rd Party Notification she got, gave her the refund she claimed, IRS is not estopped to issue a SNOD when they caught their error.

Maria Shenorah’s claim she shouldn’t have to suffer for IRS’ mistake is a loser. She owes tax, plus the 10% whatever, on what isn’t qualified higher education expense (see Section 529(e)(3)).

Maria Shenorah never got the SNOD, so she’s entitled to trial de novo on her liability.

But a trial de novo is still a trial, and Maria Shenorah comes up short on her liability and on abuse of discretion.

Judge Vasquez: “Petitioner has not advanced any evidence that SO T abused his discretion in sustaining the proposed levy action against petitioner for her … income tax liability.  Petitioner’s briefs and trial testimony did not identify any defects in SO T’s verification process.  At trial petitioner argued that she should not be required to pay her … income tax liability because respondent should have verified that she did not roll over the proceeds from her ERS distribution when respondent’s IVO reviewed her … tax return.  She further alleged that respondent misallocated funds by issuing a refund to her before determining a deficiency for the … tax year.  This Court has already rejected petitioner’s arguments by holding that (1) the IVO’s review and verification of petitioner’s 2010 tax return does not constitute an audit or examination and (2) respondent is not precluded from determining a deficiency after issuing a refund.” 2019 T. C. Memo., 65, at p. 19. (Name omitted).

Maria Shenorah had been up to Tax Court two years ago, when IRS tried for summary J from a NOD off a CDP. IRS got a win on the IVO and the SNOD-after-refund, but Maria Shenorah got a trial de novo. I didn’t blog that opinion, although maybe I should have. Here it is.

But since Maria Shenorah gets allowed more qualified higher education expense to offset the 10% gig than IRS allowed in the 2017 CDP, she’ll need to do a Rule 155 beancount.

 

RACHMOUNIS

In Uncategorized on 06/05/2019 at 15:43

I Know There Are Variations, I Just Picked One

My understanding of the meaning of this word is “compassion, fellow-feeling.” There are many transliterations and as many variant pronunciations. But the underlying emotion is the same.

A docket search shows counsel moved to withdraw before Judge Albert G (“Scholar Al”) Lauber tossed his client’s petition for lateness. I expect counsel has already received The Phone Call. See my blogpost thus entitled.

The opinion is Curtiss T. Williams, 2019 T. C. Memo. 66, filed 6/5/19. I blog it for the laundry list of the ways and means Tax Court uses to suss out the timely delivery of a petition when USPS fails to provide a legible postmark, which Judge Scholar Al kindly lays out for us. Save this list for your briefing file.

But counsel’s declaration under penalty of perjury in support of timely mailing (Section 7502 mailed-is-filed) falls way short. While the usual delivery time from point of mailing (counsel’s home) to the hands of the hard-laboring intake clerks and flailing datestampers at the Glasshouse is seven (count ‘em, seven) days, and the max Tax Court ever saw was eight days, this one got there in 36 days. The date of the petition doesn’t match the date of mailing stated in counsel’s declaration. And getting caught in the Thanksgiving-New Year’s flood of mail can’t explain 36 days.

I’m not saying counsel did or said anything wrong. I have no personal knowledge; and let any one of us who has never blown a deadline cast the first cliché.

But I have sympathy for counsel. This is one tough story.

 

THE BRAND

In Uncategorized on 06/04/2019 at 16:41

K. Slaughter, 2019 T. C. Memo. 65, filed 6/4/19, claims she is a “brand author.” That doesn’t mean someone who invents the name and attributes of merchandise. K is an author whose name alone sells books; the book buyer doesn’t ask by title. The book buyer wants “the latest Slaughter.”

Judge Wells has to deal with eight (count ‘em, eight) lawyers, three for K and five for IRS, none of whom cites to Sergio Garcia or Retief Goosen (see my blogpost “Icon vs. Iceman, 3/15/13).

The split, of course, is between earnings from trade or business (K writes books), and earnings as a “brand author,” one whose persona adds value to words on paper. The earnings from trade or business of writing attract SE, but somehow the persona component is like an investment which throws off a non-business increase in wealth. Thus spake K’s trusty CPA, with whom K had worked for thirty years, and who had a plethora of qualifications. So no chops.

K had media coaches, did events, and promoted herself. “Petitioner’s promotional activities and writing have created a very successful brand and body of work.  In petitioner’s case, her brand includes her name and likeness as well as her reputation, goodwill, and existing readership. Book buyers walk into book stores and request petitioner’s books using her name rather than the title.  Petitioner has developed good relationships with booksellers and librarians, which help to sell her books.  She also maintains contact with her readership through social media, websites, and a newsletter.” 2019 T. C. Memo. 65, at p. 6.

So the question is whether, pursuant to the publishing contracts into which K entered over the years, the income she derived had a sufficient nexus with writing to make it subject to SE, as part of K’s trade or business.

K’s deductions for her promotional endeavors showed up on Schedule C.

But ultimately, no books, no brand. Perhaps a more carefully drafted publishing contract might differentiate between royalties for brand enhancement, and just plain literature.

And tell ‘em Sergio Garcia sent ya.

Edited to add, 6/5/19: An e-mail exchange with counsel for K Slaughter informs me that both IRS and said counsel cited Sergio Garcia, but Judge Wells didn’t discuss the case. Maybe so K Slaughter’s team might consider reconsideration.

 

EH BIEN, VOILA AU MOINS QUI N’EST PAS BANAL – REDIVIVUS

In Uncategorized on 06/04/2019 at 13:41

The taxi dispatcher of the Marne, Gen. Joseph Simon Galieni, once again hoists his celebrated remark to my masthead, as we revisit Management Concepts, PLC, of Phoenix, AZ, and their repurposing of client SNODs. Today it’s Steven E. Ayers & Donna J. Ayers, Docket No. 15315-18, filed 6/4/19.

Steve & Donna were also investors in Clean Energy Systems. For the backstory on Clean Energy Systems and its associates, see my blogpost “Eh Bien, Voila Au Moins Qui N’est Pas Banal – Deuxième,” 10/11/18. And it seems Ryan M. Richardson does a reprise of his role from last October, when he testifies at the evidentiary hearing Judge Buch orders.

The Management Concepts sent in a petition with a SNOD attached for Steve & Donna.

Believe it or not, the SNOD had two (count ‘em, two) cover pages. SNODs don’t have two cover pages. But this one had one with a date that would get the petition tossed for lateness, and one that would render the petition timely.

IRS has the PS3817 certified mailing list showing only the earlier, so claims Steve & Donna should get tossed.

But Judge Buch is after bigger game.

“The Court conducted an evidentiary hearing in this case with the aim of developing a record that would explain why there were two cover pages with the notice of deficiency attached to the petition. Respondent duly served a subpoena on Carl Rex Olson, the principal officer of Management Concepts, PLC, directing him to appear and testify at the evidentiary hearing. Mr. Olson did not appear at the evidentiary hearing.” Order, at p. 2.

You don’t need to be a special counsel or a Cabinet member to know this is a hearing you don’t want to attend.

But Ryan M. Richardson shows, and dishes in extenso.

Ryan M. says he never doctored the SNOD in his case, which featured in my blogpost above-cited. Ryan M. “…testified at the evidentiary hearing that he believes that Mr. Olson was responsible for altering the notice of deficiency attached to the petition in his case.” Order, at p. 3.

Of course, Ryan’s petition got tossed.

So does Steve’s & Donna’s.

Judge Buch didn’t send the U. S Marshal to escort Mr. Olson to The Glasshouse. “Considering all of the circumstances, including the necessary commitment of additional time and resources, the Court determined that it was not worthwhile to compel Mr. Olson to appear at the evidentiary hearing.” Order, at p. 5, footnote 3.

But Judge Buch is not amused by Mr. Olson’s shenanigans. “The Court finds on this record that Mr. Olson was responsible for altering the notice of deficiency attached to the petition in this case and that he did so in a deliberate attempt to mislead the Court and the Commissioner. He engaged in similar misconduct in several other cases. His dishonest and misguided efforts have harmed the petitioners in this case and others and wasted the resources of the Court and the IRS. Should Mr. Olson engage in similar conduct in the future, the Court would strongly consider referring him to the U.S. Department of Justice for prosecution.” Order, at pp. 4-5. (Footnote omitted, but it says 18 USC Sec. 1001 makes it a crime to knowingly and willfully submit a materially false document to a Court.

But if you’re going to do it, at least don’t send in both cover pages.

 

IRS CAN’T ADD

In Uncategorized on 06/03/2019 at 16:33

Judge Buch is faced with IRS’ numerate shortcomings, just as he’s trying to finish up with master frivols Peter E. Hendrickson & Doreen M. Hendrickson, Docket No. 6863-14, filed 6/3/19.

See my blogpost “Cracked,” 2/11/19, for the lead-in to today’s episode. So Pete & Doreen face off on the Rule 155 beancount for the Section 6651(a) chops, because IRS got Pete’s filing status wrong in the SFRs, and the Section 6663(a) fraudulent filing chop doesn’t apply, because what Pete & Doreen filed wasn’t a return. Their nonfiling, however, was fraudulent.

OK, so it seems IRS got the multipliers right. For Section 6651(a) fraudulent nonfiling – nonpaying, it’s the monthly .15 (15%) fraudulent nonfiling, minus the regular .05 (5%) nonpaying, where both nonfiling and nonpaying, and fraud is in play, per Section 6651(a)(1) and (a)(2). And the chop maxes out at five months, thus 72.5% (15% – 0.5% times 5 months = 72.5%).

“Although the Commissioner used the correct multiplier, it is unclear whether he applied that multiplier to the correct amount. The Commissioner’s calculation as to the amount of the section 6651(a)(1) and (f) addition to tax matches the amount of the penalty shown on the notice of deficiency. But the fraud penalty is applied to the amount of an underpayment (sec. 6663) whereas an addition to tax for a fraudulent failure to file is applied to the tax required to be shown on the return (sec. 6651(a)(1)). The Commissioner’s computation of the addition to tax for fraudulent failure to file contains the conclusory statement ‘Manually Computed Penalty’ with no computations shown. And from the amount of the addition to tax, it is not readily apparent that the Commissioner applied the multiplier to the tax required to be shown on the return. It is also unclear whether the Commissioner took into account payments or withholding as required by section 6651(b)(1). Accordingly, the Commissioner will need to resubmit computations of the section 6651(a)(1) and (f) addition to tax….” Order, at pp. 3-4.

And although IRS omitted the tax Pete & Doreen paid for one of the years at issue, it didn’t affect the underpayment amount, so that error was harmless. But for two (count ‘em, two) other years, IRS seems to have left off withholding, without explaining why it was proper so to do.

So it’s a Mulligan all around.

HORSEFEATHERS

In Uncategorized on 06/03/2019 at 16:06

The slang term, not the 1932 Marx Bros. extravaganza, figures in Mitchel Skolnick and Leslie Skolnick, et al., 2019 T. C. Memo. 64, filed 6/3/19. Mitch and Les and the als stand accused by IRS of hobbyhorsing around with Bluestone Farms, Inc.

Word to a colleague: Peter Reilly, CPA, here’s another Section 183 hobby loss case for ya.

It falls to Judge Albert G (“Scholar Al”) Lauber, one-time schoolmate of Mr. Reilly’s at a distinguished boys’ high school in Our Fair City, to decide whether Mitch’s and Les’ expert can expound his expertise on their behalf at trial.

Mitch’s and Les’ (and the als’) expert is R (name omitted), supposedly the North American continent’s leading bloodstock valuation expert.

“Mr. R’s proposed testimony consists of a 3-1/2-page report with a pair of attached spreadsheets.  The substance of his report (putting aside paragraphs devoted to formal aspects and his qualifications) consists of three paragraphs that take up less than two pages.  He opines that ‘the appraisal of horses is not an exact science and is greatly influenced by numerous economic and social factors.’  In particular, he states that the valuation of horses ‘can be affected in a volatile way as a result of any natural disaster, disease  outbreaks, global crisis or governmental actions.’”  Order, at p. 3.

And R has two (count ‘em, two) spreadsheets, valuing 153 (count ‘em, 153) ponies Bluestone owned at one or another material time.  These list just name, rank, serial number and valuation.

“Because the written report serves as the direct testimony of the expert witness, the report must comply with the requirements for expert testimony set forth in Fed. R. Evid. 702.  Rule 143(g)(1) accordingly requires that an expert witness report ‘shall contain” (among other things) the following:  “(A) a complete statement of all opinions the witness expresses and the basis and reasons for them; (B) the facts or data considered by the witness in forming * * * [his opinions]; [and] (C) any exhibits used to summarize or support * * * [his opinions.]’

We conclude that [R’s] report does not satisfy the requirements of the Federal Rules of Evidence or this Court’s Rules.  His report does not set forth any ‘facts or data’ on which he relied.  Fed. R. Evid. 702(b); Rule 143(g)(1)(B).  Although he avers that he consulted an in-house database, his report includes no data from that database, and he does not attach a printout of the database as an exhibit to his report.  He does not identify the valuation ‘principles and methods’ that he employed in performing his appraisal.  See Fed. R. Evid. 702(c).  Although his ‘brief guidelines’ list nine factors that he believes affect valuation, he does not explain how he applied or weighted those factors when attaching a dollar figure to each horse.  His report thus fails to establish that he ‘reliably applied the principles and methods to the facts of the case.’  See Fed. R. Evid. 702(d).” 2019 T. C. Memo. 64, at pp. 6-7.

True, Mitch and Les handed over a thumbdrive with R’s database, which included thousands of horses. But which of those was owned by Bluestone when was left for IRS’ counsel to sort out four days before trial. No go with that. Can’t provide evidence so close to trial that effective cross-examination isn’t possible.

But experts can testify based on their experience, can’t they? Sure, says Judge Scholar Al. But “While an expert can be qualified on the basis of his experience, he cannot cite his experience as the sole basis for putting a dollar value on a horse.  He must show his work, viz., the data he considered and the methodology he applied to produce his results.” Order, at p. 11. (Citation omitted).

Unlike Sylvia Plath’s “Mad Girl,” the expert can’t testify “I must have made it up within my head.”

Mitch and Les say R “…regularly used spreadsheets resembling those attached to his expert report to supply information to clients of his bloodstock agency.  But what is acceptable in a commercial context is not necessarily reliable as expert testimony in Federal court.  A person intending to bid on a horse may rely on a dollar estimate supplied by his blood stock agent, much as a person intending to bid on a house may rely on a dollar estimate supplied by his realtor.  In neither case may the customer be interested in how his agent came up with that number.  But under our adversarial system, the Federal Rules of Evidence impose higher standards for expert witness testimony in Federal court.  See Fed. R. Evid. 702, Adv. Comm. Note to 2000 Amendment (‘The trial court’s gatekeeping function requires more than simply “taking the expert’s word for it.”’ (Citation omitted). Order, at p. 11-12.

Finally, the immortal aphorism of the late Justice Potter Stewart, which appeared on this site just a couple weeks ago (hi, Judge Holmes), gets a play. But it doesn’t get it for Judge Scholar Al.

“Finally, petitioners assert that the valuation of horses is more art than science, citing Justice Stewart’s famous apothegm from a different context: ‘I know it when I see it.’.  This may be a practical approach to identifying pornography, but it is not, for the reasons we have stated, an acceptable approach to formulating expert appraisal testimony under the Federal Rules.  We accept petitioners’ point that an expert appraising a herd of horses need not necessarily supply, for each horse, the massive volume of data that courts customarily receive from experts appraising real estate.  But the horse appraiser must still explain how he got to his results, which requires that he show the data he considered, the methodology he applied, and the manner in which he applied his methodology to reach his valuation outcomes.  Without that information, the Court has no means of examining whether the report ‘rests on a reliable foundation and is relevant to the task at hand.’” Order, at pp. 12-13 (Citations omitted).

R gets left at the starting gate.

 

 

A 125% INCREASE

In Uncategorized on 05/31/2019 at 18:00

I long ago entitled a blogpost “Lawyers Can’t Add,” and I plead guilty. Perhaps some numerate reader can verify my arithmetic, but the triennial enrollment fee for EA’s and ERPAs has been increased from $30 to $67.

Granted, that won’t break the bank. Only two people bothered to comment, one pro, one con. But ya gotta love RPO’s accounting. Take a look.

 

END TAXATION WITHOUT REPRESENTATION

In Uncategorized on 05/31/2019 at 17:02

Those who register and operate motor vehicles in Our Nation’s Capital display the above caption on said vehicles as required by law. And even though a quick docket search of Fritz Steven Schwager, Docket No. 17954-18L, filed May 31, 2019, reveals that he requested trial in MI, where presumably he registers whatever motor vehicles he has, he might wish to adopt the DC motto.

But Judge Patrick J. (“Scholar Pat”) Urda isn’t having it in his courtroom.

Fritz sent in a document “… styled as ‘petitioner’s attorney in fact appearance.’ That document purported to be an entry of appearance by Edwin Victor Nassar, who is not an attorney, on behalf of Mr. Schwager to act as Mr. Schwager’s representative in this case.” Order, at p. 1.

Scholar Pat did some quick research, found Mr. Nassar wasn’t a Tax Court admittee, and bounced Fritz’s paper.

Fritz, following the well-known but often deleterious “blue pill” formula (“if one doesn’t work, try three”), ripostes as follows.

“In three filings…, Mr. Schwager asserted that he had a constitutional right to counsel of his choice, that he was confident in Mr. Nassar’s ability to represent him, and that our decision worked a deprivation of his due process rights.” Order, at p. 2.

As I’m sure my ultra-sophisticated readers are well aware, brilliance is not the standard for representation. Ya gotta be admitted.

“Mr. Schwager’s arguments are meritless. The Sixth Amendment right to counsel does not extend to Tax Court proceedings.” Order, at p. 2. (“Somber reasoning and copious citation of precedent” omitted).

Nothing stops Mr. Nassar from taking the exam next November, finding two (count ’em, two) sponsors, and stumping up the $30 registration fee if he passes. But absent that, nuthin’ doin’.

“Moreover, Congress has explicitly equipped this Court with the authority to govern those who practice before it. See sec. 7452 (providing that the representation of taxpayers before this Court is to be conducted ‘in accordance with the rules of practice prescribed by the Court’). This statutory provision comes against the backdrop of federal courts’ broad (and oft-recognized) authority to regulate those before them. See, e.g., Goldsmith v. U.S. Bd. of Tax Appeals, 270 U.S. 117, 122-123 (1926) (concluding that predecessor to the Tax Court possessed the implied authority to regulate the admission to practice before it); Pappas v. Philip Morris, Inc., 915 F.3d 889, 894-895 (2d Cir. 2019) (noting that ‘[f]ederal courts have discretion to adopt such rules as are necessary to carry out the business of the courts * * * includ[ing] the regulation of admissions to a court’s own bar”); Matter of Abrams, 521 F.2d 1094, 1099 (3d Cir. 1975) (discussing the ‘unquestioned principle’ that federal courts have the power ‘to prescribe requirements for admission to practice before that court’).” Order, at p. 2.

Judge Scholar Pat assures Fritz that he ”…will have a full opportunity to be heard. But because Mr. Nassar has not been admitted to practice in this Court, he cannot serve as Mr. Schwager’s representative in this case.” Order, at p. 2. And Fritz can file his own papers.

“I MUST MAKE AMENDS” – PART DEUX

In Uncategorized on 05/30/2019 at 16:55

Judge Goeke has inherited the ongoing never-ending story of John E. Rogers and Frances L. Rogers, et al., 2019 T. C. Memo. 61, filed 5/30/19. Now the story appears to be nearing its end, as we have to do today with the never-ending penalties which IRS wishes to bestow on Mr. and Mrs. Rogers.

Tax Court already blew off the Rogers’ phony deals; see my blogpost “Will It Never End?” 4/17/18, wherein I was reduced to silence by Judge Goeke’s 134-page deconstruction of the Rogers’ neighborhood. But the 20% chops (accuracy and negligence) remained.

Frances wanted innocent spousery, but this went down, as more particularly bounded and described in my blogpost “When All Else Fails – Redivivus,” 7/3/17, and Frances paid. But there were penalties assessed at partnership level, and on brief this time Frances claims Section 6751(b) Boss Hossery, which IRS doesn’t have. So Frances wants out from that set of chops.

No dice, says Judge Goeke.

“However, Mrs. Rogers now seeks to raise section 6751(b) noncompliance against penalties determined in a partnership-level case.  We lack jurisdiction to consider penalties in a partner-level case that were determined at the partnership level.  The Commissioner’s noncompliance with section 6751(b) is a partnership-level defense.  Parties in a partnership-level case may raise noncompliance with section 6751(b) as a defense.  However, a partner may not raise section 6751(b) noncompliance as a defense at the partner level for penalties previously determined at the partnership level.  Under section 6230, partner-level defenses are ‘those that are personal to the partner or are dependent upon the partner’s separate return and cannot be determined at the partnership level.’  Sec. 301.6221-1(d), Proced. & Admin. Regs.  The tax treatment of partnership items and the applicability of any penalty, addition to tax, or additional amount that relates to an adjustment to a partnership item is determined at the partnership level.  Secs. 6221, 6226(f).  Accordingly, Mrs. Rogers is not entitled to a refund of penalties paid with respect to the partnership item adjustments.” 2019 T. C. Memo. 61, at pp. 22-23 (Citations and footnote omitted).

But the footnote is very interesting, because it states (in pertinent part, as my expensive colleagues say), “Sec. 6015 assumes that there is an existing joint tax liability; it does not consider whether the underlying joint tax liability exists.  The requesting spouse cannot seek review of preassessment procedures. Id.  Accordingly, it is unclear whether we would have jurisdiction under sec. 6015(e) to consider sec. 6751(b) compliance.” 2019 T. C. Memo. 61, at p. 23, footnote 8. Will the Graev never close?

Now IRS has eight (count ‘em, eight) lawyers on this case at present, and the number of RAs, SOs, and various supervisors would make up a full-strength infantry platoon, so Judge Goeke has to mix-and-match the Boss Hosses, and sift the lot.

The point of my headline (and my readers will doubtless say “There is a point? How quaint.”) is that a penalty to do with COGS on one of the Rogers’ real estate deals was brought in by IRS’ various counsel.

“The record also establishes section 6751(b) compliance for the section 6662 penalty on …COGS adjustment and the section 6662A penalty for the …adjustment initially determined by respondent’s trial attorneys.  Respondent asserted the penalty attributable to the COGS adjustment for the first time in the amendment to the answer.  Both Attorneys C and P worked on the amendment, but the record does not identify which attorney made the initial determination.  Petitioners did not address this lack of clarity on brief.  AAC C approved the penalty in writing by initialing and dating a draft of the amendment to the answer.  AAC C was both attorneys’ supervisor. Accordingly, we find that respondent satisfied his burden of production for section 6751(b) compliance regardless of which attorney initially determined the penalty.

“AAC C also approved Attorney C’s initial determination of the section 6662A penalty through her emails to the IRS Technical Services Unit.  Section 6751(b) does not require written supervisory approval in any particular form. Moreover, it does not explicitly require a signature; it requires the penalty be ‘personally approved (in writing)’.  Sec. 6751(b)(1); see Graev III, 149 T.C. at 488-489 & n.3 (a supervisor’s initials were sufficient writing).  Accordingly, we find that AAC C’s emails satisfied respondent’s burden of production of section 6751(b) compliance.” 2019 T. C. Memo. 61, at pp.24-25 (Citations omitted).

So beware the amended answer, practitioner. Just be prepared for an off-the-cuff Boss Hoss sign-off.