I haven’t found a name for the petition-forty-years gambit, but Tax Court Judges are on to it. Ex-Ch J L Paige (“Iron Fist”) Marvel was, I think, the first, with “A New Gambit?”, 4/2/18, and her later “I’m Beginning to See the Light,” 4/9/18, showed the game for what it was, a dodger’s ploy to try to duck assessables and timed-out deficiencies.

Today we have William George Spadora, Docket 13130-19, filed 10/1/20. Wm G only wants to petition eighteen (count ’em, eighteen) years.

Now we heard ex-Ch J Iron Fist’s lament last month, how IRS was overburdened with checking out multitudinous years for every dodger who played this gambit. So she showed the Section 6673 yellow card in my blogpost “Pour Encourager Les Autres,” 8/17/20.

Judge Gale has Wm G moving to toss for no jurisdiction, as there are no NODs or SNODs against him from 2000 to 2018. IRS moves to toss because the SNODs for 2004, 2010, 2011, and 2012 were never petitioned, and there aren’t any others.

Judge Gale, seeing Wm G is playing the Old Times gambit, plays Gale’s Defense.

Holding in abeyance both IRS’ motion to toss and Wm G’s motion to toss, Judge Gale orders as follows: “…petitioner shall, on or before November 18, 2020, file a response to respondent’s Motion to Dismiss for Lack of Jurisdiction, which shall: (1) for each taxable year listed in the Petition, clearly and concisely set forth the matters in dispute and the basis upon which petitioner invokes our jurisdiction; and (2) for each taxable year with respect to which petitioner contends we have jurisdiction, include a copy of any notice of deficiency or notice of determination concerning collection action issued for such year.” Order, at p. 2.

This is known in certain circles as a “call.” It is generally followed with a swift gathering up of cards (by the dealer) and chips (by the caller).

“He who tells too much truth is sure to be hanged.” G. B. Shaw

Ol’ Bernie Shaw knew whereof he put words in Joan of Arc’s mouth. Just ask Arthur Robert Smus, Docket No. 13949-19, filed 10/1/20.

Arthur’s SNOD petition hit the Glasshouse on Day 91. But it needed a postmark from Day 90, and that it did not have. IRS moved to toss for want of jurisdiction. Arthur didn’t answer.

Judge Elizabeth A. (“Tex”) Copeland set IRS’ motion down for a telehearing, whereat IRS’ counsel recounted many attempts to reach Arthur, with no response. Judge Tex Copeland likewise had attempted to contact Arthur, but the rest was silence.

Arthur neither Zoomed nor phoned until ten (count ’em, ten) minutes before the inevitable toss.

“Petitioner’s late filed response indicates that to his recollection, he petitioned the Court on the evening of [Day 90], but that FedEx didn’t ship out packages until the next morning and therefore the petition was postmarked [Day 91]. Additionally, the response indicates that petitioner has looked for his FedEx receipt to provide proof that his petition was timely, yet has been unsuccessful in locating that receipt to share with the Court. Petitioner’s late response to this Court’s Order and his failure make an appearance at his hearing is reason enough for the Court to grant respondent’s motion; yet petitioner is admitting his return was postmarked and mailed after the 90 day period for filing a Tax Court petition set forth in I.R.C. section 6213(a) that would otherwise give us jurisdiction to hear his case.” Order, at p. 2.

See supra.

No stealth about it, IRS, trying to submarine Rule 147 and the scheduling order,  unloads a spread of trial subpoenas after the scheduling order cutoff for discovery in YA Global Investments, LP f.k.a.  Cornell Capital Partners, LP, et al., Docket No. 14546-15, filed 10/1/20. But Judge James S (“Big Jim”) Halpern only lets IRS have one, not the ten they wanted.

Teletrials are new, and one problem is how to get third parties to show up. Tax Court solved that with the August 6 press release.  YA claims sabotage, and IRS ripostes that those subpoenaed already talked to IRS and had relevant materials.

Now of course there’s the usual Rule 147 vs. FRCP 45 argy-bargy, but Judge Big Jim has the usual “somber reasoning and copious citation of precedent” to show that, whatever, you can’t use trial subpoenas to game the scheduling order cutoff.

IRS says, “But COVID-19! And August 6 two-week free kick!”

“The August 6 procedure may provide a temptation to use a trial subpoena to attempt unauthorized discovery by opening an approximately two-week period between any return of a document subpoena pursuant to that procedure and the start of the virtual hearing session for which the documents are subpoenaed. Two weeks may prove a useful period to determine the benefit of the documents produced and adjust a trial strategy accordingly.” Order, at pp. 9-10.

See above. “We need not here determine whether the limits for a Rule 147(b) trial subpoena are coextensive with the general rule that Fed. R. Civ. P. 45 subpoenas may be employed in advance of trial and after the discovery deadline for the limited purposes of memory refreshment, trial preparation, and to secure, for the use at trial, original documents previously disclosed by discovery. Respondent’s proposed subpoena to Bruce, to rectify [Bruce]’s possible lack of authority in producing documents that respondent already has in hand and may use (we assume at trial) is an appropriate use of a trial subpoena. The remainder of respondent’s proposed subpoenas, however, if we allowed them to issue, would threaten the integrity of our discovery rules.” Order, at p. 10.

IRS does get to subpoena Bruce, because he previously produced some documents he may not have been authorized to produce. So IRS wants to make sure before picking the fruits of the forbidden cliché that same are wholesome.

The rest of the barrage is out.

But lest I be accused of piling on IRS after the whistle, remember Rule 147 doesn’t allow for pretrial subpoenas. See my blogpost “The Time-Bound Subpoena,” 12/26/19. Sure, here IRS was trying to score from first on a bloop single; but their try wasn’t wholly without basis.

But why not revise Rule 147 to line it up with the FRCP?

Judge Gustafson’s obliging nature stops short of John Van Druten’s 1951 take on Christopher Isherwood’s classic ancestor of Cabaret. You’ll see why when you read Steven Tanner & Deborah Tanner, Docket No. 12822-19S, filed 10/1/20. Steve takes the lead here.

“To help prepare for that trial, the Court held a telephone conference with petitioner Steven Tanner and the Commissioner’s counsel….” Order, at p. 1.

Judge Gustafson notes that IRS’ counsel (whom I’ll hereinafter designate as Pat) has sent Steve a stip of facts, which Steve is to emend and retun prontito.

Inter alia, as my expensively-educated colleagues would say, Steve says he has maybe 750 documents in a storage unit that he wants to put in on the trial. Judge Gustafson gives Steve until Monday to get them to Pat. As trial is set for two weeks thereafter, maybe Pat should see them. I suggest if Pat doesn’t see them, unless they’re for impeachment, no one should see them, at least not on the trial.

Steve also has to send in his pretrial memo; Pat has sent in his. “The court noted that one important aspect of the pretrial memorandum is its identification of any witnesses that the parties expect to call. Mr. Tanner said he did not know whether he would call any witnesses other than himself and his co-petitioner wife, Deborah Tanner. The Court observed that this information is overdue and urged Mr. Tanner to promptly notify [Pat] of any witnesses and to prepare for the witnesses’ participation in the video proceeding.” Order, at pp. 1-2.

Speaking of video, and giving me the title of this little story, Steve isn’t sure his laptop has a camera. “The Court instructed him to find out and, if it does not, to purchase a camera, since petitioners are responsible for equipping themselves to participate in the trial.” Order, at p. 2. Judge Gustafson won’t go that far.

But Steve’s somewhat casual trial prep doesn’t wholly dampen Judge Gustafson’s obliging nature.

“The Court stated that the Court and the parties would have a pretrial video conference on Friday, October 9, 2020, to practice making their video connection and to further prepare for the trial.” Order, at p. 2.

The dress rehearsal is at 11:00 a.m., AZ time, but as it is remote, Judge Gustafson cannot bring “some non-vacuum-packed hot-smoked whitefish, with a couple slices old-time Russian rye-pumpernickel (hi, Judge Holmes), salted butter and a wee glass tea” for each attendee. See my blogpost “Whitefish and Silt,” 5/13/20.

Judge Mark V Holmes may have been relegated to senior status, but his famous remark about today’s silt-stirring muddying tomorrow’s water remains. And the current silt-stir was stirred up by DC Cir in Myers; if you don’t remember Myers, see my blogpost “For Whom the Equitable Tolls,” 4/10/20.

George Jerome Stevenson, 2020 T. C. Memo. 137, filed 9/30/20, hasn’t got much of a case. George J is complaining that “… a target taxpayer, an individual, had failed to give him and ask that he fill out a Form W-9, Request for Taxpayer Identification Number and Certification. Petitioner did not explain why this was problematic and did not allege that the target had underpaid tax or had violated any internal revenue law. Petitioner attached to his Form 211 a one-page description of a publicly traded international bond fund. He did not allege any underpayment of tax or tax violation by the fund or its principals.” 2020 T. C. Memo. 137, at p. 2.

The Ogden Sunseteers, perhaps chastened by Lacey, sent George J’s bœuf to a SB/SE classifier, who checked out target, and found all returns filed and all taxes paid. Wherefore he suggested tossing George J.

The OS duly tossed, and George J petitioned.

So why does this rate a T. C. Memo., and why am I writing about it? Judge Albert G (“Scholar Al”) will tell you.

“He signed and dated the petition May 2, 2019, but the envelope in which it was delivered to the Court does not bear a postmark. The Court received and filed the petition on May 13, 2019.” 2020 T. C. Memo. 137, at p. 4. Note that the toss was dated April 10, and the magic SOL for Section 7623s is 30 days.

IRS moves for summary J, despite some very confusing language in Van Bemmelen that summary J is not appropriate where the administrative record tells the whole story, but maybe it is. See 2020 T. C. Memo. 137, at pp. 5-6, and re-read Van Bemmelen; I ducked this when I blogged the case (see my blogpost “Administering Supplements,” 8/27/20), because I didn’t understand it, and IRS got summary J in that case anyway. And (spoiler alert) they get summary J here, too.

Judge Scholar Al invokes equitable tolling sua sponte. IRS never mentioned SOL. George J never responded to IRS’ summary J motion, and so would lose off the bat, but for Judge Scholar Al’s well-developed sense of fair play. If George J was a couple days (hi, Judge Holmes) late posting the petition, he gets equitably tolled.

But of course George J. craters anyway.

“The administrative record shows that the Office properly rejected petitioner’s claim because he did not provide any credible information regarding a Federal tax violation. The Office based its decision on a recommendation from Mr. M., a classifier in SB/SE. He investigated petitioner’s claim by retrieving and analyzing the target taxpayer’s tax filings and IRS account transcripts. He determined that petitioner’s allegations lacked credibility because petitioner did not identify a particular tax year, did not identify a discernible Federal tax issue, and did not supply any source documents.” 137 T. C. Memo. 137, at p. 8. (Name omitted).

Summary J for IRS.

Years ago I proposed that Tax Court adopt the old NY State Court practice known as “settle order on notice.” For the backstory, see my blogpost so entitled. I note that blogpost is the most-read of all my blogposts.

Judge Albert G (“Scholar Al”) has picked up on the idea in six (count ’em, six) designated hitters, all of like tenor. I’ll choose Edward J. Tangel & Beatrice C. Tangel, et al., Docket No. 27268-13, filed 9/30/20.

The fight is over a Rule 103 protective order in a Section 41 research and experimentation fight over $872K in credits.

“Petitioners supplied thousands of documents to respondent during discovery, and they seek an order that would protect a large subset of these documents from public disclosure at trial. Were we to grant such an order, the protected documents would be included in one or more stipulations of fact that would be sealed and made non-viewable by the public. Trial testimony addressing the sealed exhibits would be taken in a closed courtroom, and the transcript of such testimony would be contained in separate volumes of the transcript that would also be sealed.

“Petitioners appear to seek protection for 2,472 trial exhibits. Of these, 2,417 seem to relate to a single project, ‘Terminal High Altitude Area Defense’ (THAAD), which petitioners describe as a ‘national defense system.’ The other 55 documents relate to a project described as ‘Capstone.’ About 75% of the THAAD-related exhibits appear to have stamped upon them a warning stating that the items contain technical data or software whose export is restricted by Federal law.” Order, at pp. 1-2.

Ed & Bea and the als also claim disclosing this stuff would reveal proprietary information, breach non-disclosures, and jeopardize national security. But Ed & Bea and the als don’t claim that non-exportation language equals non-disclosure.

“Rather, petitioners make the generalized assertion that all of the documents in question contain ‘information which is proprietary and subject to trade secret protection.’ But this is simply an assertion by petitioners’ counsel. The motion for protective order is only two pages long, and it is supported by no affidavits from Enercon officers or technicians having first-hand knowledge of the relevant facts. Respondent notes that some of the exhibits appear to relate to such everyday items as gaskets, steel plates, a fire extinguisher, a fan, a thermostat panel, and various forms of correspondence. Petitioners have supplied no detail from which the Court could conclude that all 2,472 documents (or any of them) contain protectable trade secret (or other confidential) information. Order, at pp. 2-3.

And don’t forget dear old Section 7461; in Tax Court, ya gotta go tell it on the mountain, over the hills and everywhere.

Ya gotta be more specific than that naked two-pager. Even though Ed & Bea have a bunch of high-priced lawyers, they didn’t do much of a job. If they expected Judge Scholar Al to unbake their Alaska and put the ice cream back in the cow, their expectations are thwarted.

Judge Scholar Al notes the years at issue are not less than ten years ago. A lot of secrets become public in ten years. See Order at p. 3, where he goes into Rule 103 orders in cases I’ve blogged, where protection is limited to new stuff.

Finally, we reach the point of this blogpost (and my readers will say, “There is one? How novel.”).

“The Court is inclined to believe that some form of protective order may be needed to govern the trial and post-trial proceedings in this case. But petitioners have not made a persuasive case–at least not yet–for protecting all 2,472 of these documents. We will direct the parties to work together to produce a protective order, modeled on those previously issued by the undersigned, that is targeted to protect genuine trade secrets and national security (or other confidential) information. If the parties cannot agree on a jointly-proposed protective order, we will direct each party to submit its own proposed protective order, and the Court will select one or the other.” Order, at p. 3.

Settle (protective) order on notice.

Today’s torch song from my electronic songbook comes courtesy of Gregory R. Carson, Docket No. 10801-20, filed 9/30/20, but it’s not Gregory’s story. Rather, the lyrics are furnished by Gregory’s trusty attorney, whom I’ll call Mr. W.

Gregory petitioned on paper.

On the same day as the petition hit the Glasshouse, “…petitioner, through his counsel [Mr. W.], filed a Motion To Allow Electronic Filing of Petition which the Court will recharacterize as petitioner’s Letter.” Order, at p. 1.

Thus spake Ch J Maurice B (“Mighty Mo”) Foley.

So it’s a Letter. And it’s filed. But is it moot, because there was a paper filing? If Gregory and Mr. W. want to amend the petition, does the Letter serve as a motion to allow electronic filing of amended petition(s)?

And what about the long-awaited revisions to Rules to permit electronic filing of petitions (and presumably amendments thereto) that were announced in November 2018? See my blogpost “I Sing the Petition Electronic,” 11/30/18.

Has Mr. W. cut the Gordian Knot? Do petitioners and counsel send Letters pre-petition? Will the Court treat such a Letter as an attempt to petition, sufficient to satisfy the 30-day or 90-day cutoff for petitioning NODs or SNODs?

I’m sure I am not the only observer-practitioner who would like to know the answers.

Ronald J. Lucero and Mary L. Lucero, 2020 T. C. Memo. 136, filed 9/29/20, is another Section 469 passive-loss-against-passive-income real estate joust, with the exception that short-term rentals (fewer than seven days average customer use) is active, not passive. See Reg. 1.469-1T(e)(3)(ii)(A). And Ron’s and Mary’s beachfront property met the test.

IRS tried to wild-card in Section 280A personal use on the trial. IRS has BoP on such new matter, if same would require different evidence from petitioner than what IRS’ pleadings alleged.

Despite Ron’s mediocre performance on the stand, “…on this point we accept his broader claim that most of his trips to the property were for upkeep. If we accept his testimony that every trip petitioners made to the Sea Ranch property, other than at Christmas, was for repairs or maintenance, then the time they spent at the Sea Ranch property for personal purposes totaled fewer than 14 days in each year. Respondent did not dispute that petitioners rented the Sea Ranch property to tenants for 146 days in [Year One] and 152 days in [Year Two] or allege that petitioners charged any of their tenants below-market rent. As respondent did not present any evidence of petitioners’ expenses that were attributable to their personal use of the property, see sec. 280A(e), we conclude that section 280A does not limit any of the real estate loss deductions petitioners can claim with respect to the Sea Ranch property for the years in issue.” 2020 T. C. Memo. 136, at pp. 7-8.

But Ron and Mary flunk the 100-hours-and-nobody-else test. Ron and Mary had a professional managing agent running the place.

“Mr. Lucero’s time spent paying bills, coordinating with Sea Ranch Escapes, and preparing petitioners’ tax returns constitute investor activities that do not count toward the 100-hour requirement.

“We also exclude the time Mr. Lucero spent driving between the Sea Ranch property and his Sacramento home. We recognize that petitioners drove several hours each way, but they ‘bear the expense of commuting (driving time) because it is a personal expense unless an allocation for additional expenses can be made between personal and business expenses’.” 2020 T. C. Memo. 136, at p. 12. (Citations omitted).

Ron’s and Mary’s logbook (made up after audit had begun, so you can see where this is going) is suspect, unless you accept a common stereotype, which I’m sure Judge Pugh rejects.

“Additionally, Mr. Lucero’s log reported hours for tasks that appear excessive in relation to the task described, such as spending two hours shopping for coffee filters at Bed Bath & Beyond, and included time shopping both for the Sea Ranch property and for personal items, such as one hour shopping at Gualala Supermarket for 2 items for the Sea Ranch property (garbage bags and facial tissue) and more than 20 personal grocery items. We have found the credibility of a taxpayer’s records to be diminished when the number of hours reported appears excessive in relation to the task described.” 2020 T. C. Memo.136, at pp. 12-13. (Citations omitted.)

Obviously Judge Pugh’s career has happily been free of persons who can shop till they drop. For such as they, two hours in Bed Bath & Beyond barely constitutes a warm-up, even if they buy only one item; actually buying two business items and 20 (count ’em, 20) personal items in one hour in a supermarket wouldn’t make the team’s red-shirt freshman squad.

No, neither J. D. Salinger nor Sappho; it’s Judge Joseph Robert (“JR”) Goeke, bringing whistleblower discovery into the Van Bemmelen orbit in Whistleblower 10084-16W, filed 9/29/20.  Whistleblower 10084-16W will be hereinafter referred to as “Blower 84.”

You’ll indubitably recollect that Van Bemmelen allowed but three (count ’em, three) blower record reopeners, which Judge JR summarizes as bad faith or incomplete record (so that judicial review is unavailable). Order, at p. 5. The beam for any blower discoverer to clear is set very high.

Blower 84 wants confirmation that a tax matter reflected in an SEC filing was not the result of the information Blower 84 provided. But the Form 4549, the Form 886, and the tax transcripts show that no money was collected. And for IRS to have used Blower 84’s information, they would have needed to audit, assess, and collect between June and the following February. This is not a jeopardy assessment, so the timing is way too fast.

“Petitioner has not provided any analysis explaining how each of the discovery requests it now seeks to compel satisfy the ‘directly related’ standard of the ‘item’ test contained in I.R.C. sec. 6103(h)(4)(B) or any other provision authorizing disclosure. Instead, petitioner has found a reference in an SEC filing to a settlement with ‘a taxing authority’, made an assumption that a payment was made to the IRS in tax year X, and now seeks to scour the target’s historical return information to find evidence of such payment. The Tax Court discovery process should not be used as a mechanism to provide whistleblowers with intel on the meaning of a target’s SEC filings.” Order, at pp. 2-3. (Year omitted).

An SEC filing? Is this our old chum A. Nonymous, Serial Blower? If you read the material submitted on this discovery motion (Order, at pp. 3-4), it brings back memories of my blogpost “A. Nonymous, Serial Blower,” 6/28/17.

Blower 84 loses.

Even though they were late with their return one year, and delinquent for two other years, Judge Goeke and IRS find a happy ending for Interventional Center for Pain Management, P.C., 4966-18L, filed 9/29/20. The interventionists were back for the two-year checkup on their PPIA (Partial Payment Installment Agreement), when IRS filed a NFTL.

Judge Goeke ran a bench trial back on 11/28/18, which I didn’t blog but here it is anyway. And now Judge Goeke takes up the tale.

“After a trial, the Court issued a bench opinion determining that the best course was for the parties to attempt to negotiate a full payment installment agreement (FP IA), the Court ordered a remand of the case to IRS’ Appeals Office. In the bench opinion, the Court recognized that neither party had been focused on the fundamental issue in attempting to reach a settlement that provided for the full payment of the tax liability while also not having a tax lien on file which impeded the operation of petitioner’s business. We said as follows in the bench opinion: ‘We believe that a lien  filing was premature, but we believe that it would have been appropriate for the settlement or appeals officer to negotiate with the petitioner on the basis that petitioner should agree to a full pay agreement or that the lien filing was necessary based upon a two year review to ensure that respondent was protected in the event that the tax liability was not fully paid. Given the fact that there was never any discussion of this point, which is fundamental to both parties’ positions, we believe this case should be remanded to the appeals division with very specific instructions.’

“In the bench opinion we recognized respondent’s legitimate need to have a lien on file if a full payment installment agreement (FP IA) was not achieved.” Order, at p. 2.

Judge Goeke is almost as obliging as Judge David Gustafson. He’ll teach you how to argue your CDP and try your case.

But the two-year checkup revealed that the interventionists had better than $250K in a money market, and the SO wanted the interventionists to ante up; the interventionists answered they needed the cash for payroll and vendors. And the interventionists’ line of credit would soon be paid off, so they could throw in another $3K per month. The interventionists said “no,” but made no counteroffer.

“After a remand order by this Court, petitioner ultimately succeeded in getting the NFTL withdrawn, but only after agreeing to an FP IA of $13,103.07, 135% greater than its prior PP IA. Respondent maintains this amount is more than the revenue officer would have accepted before this matter first went to appeals. Such assertion is disputed but it is clear petitioner never offered such a monthly payment to the revenue officer.” Order, at p. 4.

Now the interventionists want Section 7430 legals and admins. My kind’a guys; go for it on fourth and 35 (football is back!).

Judge Goeke isn’t giving them that.

“… petitioner’s argument for attorney’s fees is based upon an unstated premise that respondent bore the burden of initiating an offer to resolve this matter short of litigation. If petitioner sought a resolution prior to trial in good faith, we would have expected petitioner to be definite in its offer of payment. Petitioner was not until specifically instructed as to how to proceed upon remand in the Court’s bench opinion. Given the lack of a definite offer of full payment by petitioner prior to the case coming to trial, we cannot say the Appeals Officer lacked substantial justification in allowing the lien to remain as filed.” Order, at p. 4. The 7430 motion craters.

But here’s the happy ending.

“The resolution of this motion allows us to enter a decision in this case, because the parties have reached a resolution which allows a withdrawal of the Federal tax lien as reflected in the Supplemental Notice of Determination Concerning Collection Action….” Order, at pp. 4-5.