Now that he is relegated to senior moments, I’ve come to miss Judge Mark V. Holmes’ quirky locutions and colloquialisms. Rather than a silt-stir today, Judge Holmes climbs down from the “bedrock of Tax Court practice” in Scott A. Householder & Debra A. Householder, Docket No. 6541-12, filed 9/11/20.

Scott & Debra have been here before, horsing around (see my blogpost “Gilded Offering, Gelded Horse,” 8/23/18) and getting hit with a res gestae Boss Hoss (see my blogpost “Greenberg’s Express – Not the Last Stop,” 7/13/18).

And Scott & Debra have returns that are “unusually complex,” Order, at p. 2.

But now everything has been tried to conclusion or stiped out. Still, Scott & Debra, and IRS, can’t reach agreement on the Rule 155 beancount. In default of the which, Judge Holmes goes back to the tried-and-true “Settle decision on notice,” hearkening back to my young day as a State courtier (see my blogpost “Settle Order on Notice,” 6/23/17).

The disagreement concerns two (count ’em, two) numbers. Scott & Debra showed a $145K gain, but the SNOD handed them a $317K loss. Of course, Scott & Debra take that thankfully. But where Scott & Debra claim $320K of flow-through income from their Sub S and various partnerships, IRS claims they really got $739K.

“The important thing to note here is that the Commissioner seemed to have made a mistake–it’s as if the revenue agent wasn’t looking at the filed return when he wrote about the adjustments he was making and compared it to what they had filed. The Householders had claimed a gain of $145,000 on their Form 4797, not a loss of $317,029; and they had claimed income of $294,502 from [Sub S and partnerships], not $320,059. And note as well that there is no mention of any adjustment to that ‘basis carryover’ number on Attachment 17 to the Schedule E.

“If this was a mistake, the Commissioner’s agents and lawyers didn’t notice it at the time.” Order, at p. 3. The basis carryover was Sub S loss that exceeded their then basis, but could be used when Scott and Debra bought more basis.

Judge, I’ve lost count of the times I’ve told all and sundry that lawyers can’t add.

Still, Scott & Debra and IRS stiped to $445K on Sched E and the $317K loss on the Form 4797 sale of business property.

You’ll recall from my glided-and-gelded blogpost aforementioned that Scott & Debra lost on the trial of the horsetheft.

“The Householders’ computations…took the numbers on the filed returns, then substituted different numbers from the stipulations in this case and the related TEFRA cases, and hit whatever button in Excel actually does the math. The result turns out to be zero deficiency for the Householders for [year at issue].

“At this point, the Commissioner suspected something was wrong somewhere. His explanation is coherent. He suggests that the agent who drafted the notice of deficiency for [year at issue] compared his determination for the allowable Form 4797 loss not to their original return but to an unsigned Form 1040 that they submitted as part of settlement negotiations toward the end of the audit. That would make sense of the weird language in the verbal explanation part of the notice of deficiency.” Order, at p. 4.

I give IRS’ counsel a free membership in the Taishoff “Order of Michael Corleone,” third class.

Judge Holmes is less generous.

“The Householders’ rejoinder is that stipulations are a deal. Their computations reflect that deal accurately. And, by the way, the exhibits that the Commissioner attached to his motion for reconsideration are not part of the trial record, and thus have no place in our posttrial, postopinion computations.

“The Householders are right.” Order, at p. 4.

Judge Holmes man’splains.

“Numbers on a filed return are conceded by the Commissioner if not redetermined in a notice of deficiency or subsequent pleading before this court…; numbers in a notice of deficiency are conceded by a taxpayer who doesn’t challenge them in his petition…. Pleadings define what’s at issue in a case.” Order, at pp. 4-5. (Citations omitted, but get them for your briefs).

And now Judge Holmes waxes nongeological.

“Stipulations are the bedrock of Tax Court litigation or, if one wants to wax nongeologically, are a contract between the parties that further narrows the issues from those that were pled to those left to be tried.” Order, at p. 5.

Now of course a stip can be set aside if it is clearly mistaken, as shown by the record. But the only proof IRS has is a posttrial document submitted as part of a Rule 162 reconsideration. That’s not part of the record.

Result: zero deficiency, zero overstatement. A Taishoff “Good job, first class,” to Scott’s & Debra’s trusty attorneys, Kacie N. C. Dillon, Esq., and Tim A. Tarter, Esq.

Robert J. Belanger, 2020 T. C. Memo. 130, filed 9/10/20, heeded the words of old Omar too well. Robert’s construction business did well, but Robert’s bookkeeping, as delegated to son Steven and a girlfriend or two, went less well. Robert also took cash payments, and checks for payment, for work done by the business and used same to buy cashiers’ checks, which never made their way into the business records or his Schedule C. Robert ran the business.

Robert, Steven, and girlfriend ran the cash through the Cape Cod Five Cents Savings Bank (which Judge Ashford calls the Cape Cod Five), but the cash was a lot more than five cents. And Cape Cod Five was more than a sleepy small-town bank.

“…Jane B, the assistant branch manager of Cape Cod Five’s Centerville, Massachusetts, location, contacted petitioner to inform him that numerous treasurer’s checks payable to him needed to be reissued because otherwise the bank would consider the checks abandoned property. During her conversation with petitioner, Ms. B asked whether he would like her to issue one or two treasurer’s checks or open an interest-bearing money market account or certificate of deposit in his name rather than reissuing treasurer’s checks payable to him in the same amounts. Petitioner declined her suggestions and told her that he would send Ms. [girlfriend] to the bank with the treasurer’s checks that needed to be reissued.

“Ms. [girlfriend] brought 21 treasurer’s checks totaling $120,903, all originally negotiated by Steven… to Cape Cod Five for Ms. B to reissue. After Ms. B reissued the treasurer’s checks, Cape Cod Five’s security officer, Diane R, became aware of the transactions. After conducting an investigation… she filed a Suspicious Activity Report (SAR) with respect to the transactions with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (also known as FinCEN).” 2020 T. C. Memo. 130, at pp. 12-13. (Names omitted).

The tale that Robert told the Treasury Special Agent that “he had purchased multiple treasurer’s checks with cash in smaller amounts on the same day rather than one big check because he felt like it,” 2020 T. C. Memo. 130, at p. 14, got Robert 21 months in USDCDMA for corruptly endeavoring to obstruct and impede the tax laws. Steven walked.

Robert got a SNOD with Section 6663 fraud chops at no extra charge.

Robert’s SOL argument loses; there are sufficient badges of fraud to persuade Judge Ashford. The RA’s specific item reconstruction carries the day; the method uses specific items of taxable income received but not reported. Robert’s claim that some of the money was Steven’s fails, because all Steven got was salary, and though he could sign business checks, Robert was firmly in charge.

Robert’s trusty attorney, playing a bad hand as best possible, tries Boss Hossery on the fraud chops, claiming that the Boss Hoss sign-off didn’t happen until later. “Petitioner contends that supervisory approval of the section 6663 civil fraud penalties was not manifested by the 30-day letter because respondent failed to authenticate that Mr. Noonan signed the 30-day letter or when he purportedly did so. According to petitioner, written supervisory approval of the penalties was manifested by Mr. Noonan’s digital signature on the Form 11661… 51 days after the date of the 30-day letter and therefore the requisite approval was untimely.” 2020 T. C. Memo. 130, at p. 28.

But unfortunately, Robert stipulated and capitulated. “The 30-day letter (with RA G’s RAR) was a stipulated exhibit that neither petitioner nor respondent reserved an objection to. Thus, its authenticity–Mr. [Boss Hoss’s] signature and the date reflected therein–is incontrovertible, and the Form 11661 is of no moment.” 2020 T. C. 130, at p. 29. (Names omitted).

Robert didn’t heed the rest of Omar’s words; the “distant Drum” was a lot closer.

One has to admire the newest luminary on the Glasshouse bench. Sworn in only yesterday, this morning Judge Christian N. Weiler appoints himself to his first case, bypassing Ch J Maurice B (“Mighty Mo”) Foley, in ES NPA Holding, LLC, Joseph NPA Investment, LLC, Tax Matters Partner, Docket No. 13471-17, filed 9/10/20.

Check out the signature on the order.

The cognomen I waited for has arrived. Welcome, Judge Christian N (“Speedy”) Weiler.

Sworn in yesterday, the latest addition to the Tax Court bench, Judge Christian N. Weiler, comes to us from LAland. That’s Louisiana, for the uninitiated.

I look forward to a cascade of blogfodder (and material for a good cognomen) from Judge Weiler.

This non-uncommon feature of mutual-benefit organizations puts the kibosh on The Korean-American Senior Mutual Association, Inc., 2020 T. C. Memo. 129, filed 9/9/20.

KASMA was supposed to provide funeral expenses for the poor, but they had to be dues-paying members. They were also supposed to provide scholarships for worthy needy students, but never did. They were also supposed to provide social opportunities for the elderly, but their activities consisted of one (count it, one) dinner at a Korean restaurant.

STJ Diana L (“The Taxpayer’s Friend”) Leyden finds this is not 501(c)(3)-worthy.

” KASMA argues that it serves a recognized charitable class: the elderly. However, because KASMA did not provide burial benefits to the elderly without regard to their ability to pay their funeral expenses or establish that the membership application fee of $150 and the other annual fees of $300 to $350 constituted nominal charges, KASMA did not operate to serve the recognized charitable class of the elderly.” 2020 T. C. Memo. 129, at p. 18.

Now helping out old folks is a real 501(c)(3) purpose. But KASMA didn’t.

“… KASMA’s primary activity was not directed towards meeting the special needs of the charitable class, the elderly, by relieving distress or providing a community benefit. KASMA provided burial benefits only to its members who paid dues, not to non-dues-paying seniors in the community. If a member failed to pay the required membership dues for 90 days after receiving a written notice requesting payment, KASMA’s board of directors could terminate the membership and its obligation to pay any burial benefits.

“Additionally, the amount of the burial benefit paid was calculated on the basis of the number of years the deceased member had paid the other fees rather than the inability of the deceased member to pay burial expenses.” 2020 T. C. Memo. 129, at p. 21. (Citations omitted). Nor were these charges shown to be nominal.

KASMA argues equitable estoppel, because they amended their organizational documents like IRS told them. But that’s a mistake of law on IRS’ part, not misleading facts.

KASMA argued that taking away its 501(c)(3) status would hurt its goodwill and also cause it to be liable for NYC real estate taxes on its high-priced condominium.

I feel their pain. “KASMA purchased a new office condominium in Flushing, New York, on February 24, 2008, and paid the full price without a mortgage. On its Form 990 KASMA listed the book value of this condominium as $817,362.” 2020 T. C. Memo. 129, at p. 11.

I called STJ Di “The Taxpayer’s Friend.” As a NYC taxpayer, I think I got that right.

All y’all will recollect Melissa Coffey Hulett, a.k.a. Melissa Coffey, the maybe-non-Virgin (Islander) who starred in my blogpost “Another Non-Virgin,” 1/30/18. Well, today Melissa gets a reprise as she bails out Robin J. Fowler, 155 T. C. 7, filed 9/9/20, whose proper and timely e-filed return got kicked by IRS for want of an IP PIN.

No, that’s not what you get when your heartthrob hands you his/her gold-and-carnelian from Iota Pi (Gimmel chapter, 1875), domiciled at that lovely old Victorian gingerbread on College Walk. That’s an Identity Protection Personal Identification Number (IP PIN), and Judge Travis A. (“Tag”) Greaves will tell you a lot more about that than you really want to know.

Robin’s ERO (Electronic Return Originator, one blessed by IRS to e-file returns) sent in Robin’s return on extension due date, with his CPA’s P PIN (Practitioner’s Personal Identification Number), and got back the 20-digit confirm. But IRS kicked same, saying PI PIN was invalid.

Two weeks later, Robin’s CPA sent a DocuSigned paper return (same info except PI PIN) to correct Service Center Certified RRR, and got a receipt signed by an IRS employee thereat.

Two months later, Robin got a billet doux from IRS stating he hadn’t filed. So four (count ’em, four) months later, Robin got his own IP PIN, e-filed his own self (same everything except IP PIN), and that got accepted. Then as the three years from the last of these filings was slip-sliding away, IRS hits Robin with a SNOD.

Robin says SOL.

The classic test is Beard and Hulett (a.k.a Coffey). Right form, enough info, good faith attempt and signed. IRS hangs whatever hat it has on “signed.” No IP PIN, no signed.

“Despite the authority delegated in section 6061, there is little regulatory guidance as to what constitutes a valid signature. Section 1.6061-1(a), Income Tax Regs., provides only that each individual “shall sign” his income tax return. Section 1.6695-1(b)(2), Income Tax Regs., directs a signing tax return preparer to ‘electronically sign the return in the manner prescribed by the Commissioner in forms, instructions, or other appropriate guidance.’ We therefore look to the instructions to the [year at issue] Form 1040 itself. Under the heading ‘IRS e-file: Electronic Return Signatures!’, the instructions state that the taxpayer ‘must sign the return electronically using a personal identification number (PIN)’, either a Self-Select PIN or a Practitioner PIN. [Year at issue] Form 1040 Instructions, at 73 (emphasis added). Here, Mr. CPA included a Practitioner PIN on petitioner’s efiled return in accordance with the instructions.” 155 T. C. 7, at pp. 11-12 (Emphasis by the Court). (Name omitted, but I bet the poor guy got The Phone Call from Robin, and Robin should apologize; and pay whatever part of the fee he didn’t).

IRS cannot disavow, rewrite, duck, shuck or jive to get around its own instructions. See Hulett, a.k.a. Coffey.

“Respondent does not refer us to any form, regulation, or other taxpayer-directed guidance that defines an IP PIN as part of the signature. Instead, respondent cites the Internal Revenue Manual (IRM), an explanation of IRS administrative practices, which provides that if an electronic return is filed with a missing or incorrect IP PIN, ‘the e-filed return will reject.’ IRM pt. 10.5.3.2.15(3) (Jan. 16, 2014). An IP PIN does not become part of the signature requirement simply because respondent’s software will reject an efiled return without it. Furthermore, the Modernized e-File (MeF) system, which the IRS uses to process efiled returns, see infra Part II.B, rejects returns for numerous errors that may not cause a return to fail the Beard test. None of the authorities Respondent cites makes the IP PIN part of the prescribed signature method.” 155 T. C. 7, at p. 14. (Footnotes omitted, but read footnote 10: “We do not decide here whether respondent may make the IP PIN part of the efiling signature requirement; we conclude only that the IP PIN was not part of the efiling signature requirement for the year at issue.” 155 T. C. 7, at p. 14, footnote 10)).

Robin wins, SOL, SNOD invalid.

Watch for the IP PIN mandate to become ubiquitous on campus.

And that’s another reason why I paper-file.

My debt to the divergence between Tax Court Rule 147 and FRCP 45 grows through the years. It’s given me endless blogfodder, and the phrase “stealth subpoena” has echoed far beyond these columns.

Of course, there has been no official attempt to harmonize the Rules, despite Judge Holmes’ and my efforts along those lines, and Sen. Grassley’s legislative efforts (see Section 7453).

The old jibe that it takes a surgical operation to get a joke into some peoples’ heads, may have to be amended so that it takes more than an Act of Congress to conform Tax Court Rule 147 to the FRCP Rule 45 notice provision that has been in effect for twenty-seven (count ’em, twenty-seven) years with no ill effects.

Judge David Gustafson obliged the forces of rational practice. See my blogpost “Stealth Shot Down,” 11/21/19.

And the newer members of the Tax Court bench have been waging an undercover campaign.

You’ll remember Judge Emin (“Eminent”) Toro held the torch high in my blogpost “The Stealth Cold War,” 8/13/20.

Today comes Judge Patrick J (“Scholar Pat”) Urda with Western Digital Corporation & Subsidiaries, et al., Docket No. 18984-18, filed 9/9/20. “ORDERED that if a party intends to serve a non-party subpoena for the production of documents, electronically stored information, or tangible things or the inspection of premises before trial, that party shall provide notice to the other party by serving notice and a copy of any such non-party subpoena on the other party at least five days before the subpoena is served on a non-party.” Order, at p. 1.

OK, Ch J Maurice B (“Mighty Mo”) Foley. Like the sneaker says, just do it.

No, not those from a much more exalted authority than even United States Tax Court. Rather, today Judge Albert G (“Scholar Al”) Lauber is engaged in a dictionary chaw over “petitions and requests filed or pending” from the post-7/1/19 Section 6501(e)(7), in Donna M. Sutherland, 155 T. C. 6, filed 9/8/20.

Donna signed off on a couple delinquent MFJs (hi, Judge Holmes) as her spouse was being sentenced. Donna says she was emotionally confused, and even though she had no independent liability, thought she had to sign. She did file innocent spousery, but didn’t check the mental-or-physical-problems box because she thought she needed a doctor’s note.

She got bounced, and went to Appeals, but her representative was convinced the AO would misapply the Regs. and NOD the bounce, so rather than put in all the evidence at Appeals, Donna went for the pre-amendment de novo review and petitioned pre-amendment. Now Donna wants to put in the missing evidence, but based on the amended Section 6501(e)(7) “newly discovered” rule, she can’t. So she wants remand to make it clear she can put into the administrative record all the evidence her representative didn’t put in.

Judge Scholar Al has to decide if the Section 6501(e)(7) amendment applies. Remember, Donna petitioned pre-amendment, but obviously her case isn’t yet decided.

In previous post-amendment cases effective date didn’t matter, so this is first impression, thus full-dress T. C.

“On its face the effective date provision is ambiguous. ‘[P]etitions or requests filed or pending’ could mean ‘petitions filed or pending, or requests filed or pending.’ Alternatively, it could mean ‘petitions filed or requests pending.’ If the former reading is adopted, so that ‘pending’ modifies both ‘petitions’ and ‘requests,’ subsection (e)(7) likely would apply here because this case was pending in this Court when the amendment was enacted. If the latter meaning is adopted, so that ‘pending’ modifies only ‘requests’ and ‘filed’ modifies only ‘petitions,’ subsection (e)(7) would not apply. Petitioner’s request for innocent spouse relief had been resolved by the IRS, and hence was not ‘pending,’ on or after July 1, 2019. And her petition to this Court was filed before that date.” 155 T. C. 6, at p. 10.

I’ve said it so often: a lawyer who can’t find an ambiguity should find another way to make a living.

“This is an example of structural (also called syntactic) ambiguity. It arises where a sentence is susceptible to more than one meaning because of the way the words or phrases are organized. Clues to the meaning of such sentences can be supplied by the context and by other linguistic and interpretive tools.

“For example, assume a municipal ordinance that is effective for ‘cars or boats parked or docked’ at a city marina after a specified date. This provision would logically be interpreted to refer to ‘cars parked or boats docked.’ That is because each adjective comfortably modifies only one noun.

“On the other hand, assume a sales tax that is effective for ‘cars or trucks sold or leased’ after a specified date. Unless the context suggested otherwise, this provision would likely be interpreted to refer to ‘cars sold or leased, or trucks sold or leased.’ Both adjectives comfortably modify both nouns, and it would be odd to have different tax treatment for similar transactions involving similar vehicles.” 155 T. C. 6, at pp. 10-11. (Citation omitted).

Judge Scholar Al goes for the second reading. It’s “requests pending” and “petitions filed.”

I’ll spare you the linguistic anfractuosities, because Judge Scholar Al, scholar though he may be, is a practical lawyer.

“But if subsection (e)(7) were to apply to cases such as this–where the conclusion of the administrative process and the filing of the petition both preceded July 1, 2019, but the case remained pending in this Court thereafter–a sort of ‘gotcha’ could occur. The taxpayer would have gone through the administrative process believing that the scope of review in this Court was de novo. But she would then learn, once the time came for trial, that the scope of review was not de novo and that she could be prejudiced for not having made a more complete administrative record.” 155 T. C. 6, at pp. 16-17.

No need for remand. Donna can put it all in on the trial.

Those are the real comfortable words.

I chose a double major in college, philosophy and political science. If a vacancy for post of philosopher-king came open, my resumé was ready. It still is.

In my studies, I found the debate between David Hume and Bishop Berkeley.

Hume posited that there is no objective reality; we only know what we perceive. Thus, Hume would say, neither I, nor my MacBook, nor you, dear reader, exist, save in my mind. Bishop Berkeley responded that this was nonsense; of course the world, and all that is in it, exists in the mind of God.

Well, modern skepticism has little patience with that argument. But if anything has supplanted the mind of God as the source of objective reality, it is the internet. If it exists, it’s on the internet.

In proof whereof, I offer the story of the late Winston Tease, Sr., May 21, 1937 – August 23, 2020. Neither IRS nor Judge Mark V Holmes are certain of the late Winston Sr’s whereabouts in Winston Tease, Docket No. 15466-07L, filed 9/8/20.

This is a CDP from a TFRP (Section 6672).”We’ve remanded it twice to the IRS, and the second remand ended earlier this year. We ordered the parties to respond to this second supplemental notice of remand by August 28, 2020. A check of the docket showed no response from Mr. Tease, and the IRS attorney suggested informally that the reason may be that Mr. Tease has passed away.” Order, at p. 1.

Judge Holmes, unwilling to accept informal suggestions from IRS, orders a response.

“ORDERED that on or before September 30, 2020, Mr. Tease notify the Court in writing if he is still alive and, if so, state his response to the June 26, 2020 supplemental notice of determination.” Order, at p. 1.

Judge, according to the internet, IRS’ informal suggestion was right on the money. Try Google.