COVID-19 has made my idle hands idler than ever. In consequence whereof, I am starting an occasional feature on this my blog, which may or may not become a recurring one. We’ll see.

It will feature bits and pieces, none worth a whole blogpost itself.

Here are a couple random items (hi, Judge Holmes) from today’s budget of orders from The Glasshouse in Exile.

First,Champions Retreat Golf Founders, LLC., Riverwood Land, LLC., Tax Matters Partner, Docket No. 4868-15, filed 6/17/20. The Champions, hot off their recent 11 Cir win (see my blogpost “A Great Golf Fixed,” 5/15/20 for the scoop), want to get rolling with the trial, so they try a First Request for Admissions. SOP in an ordinary litigation, but Ch J Maurice B (“Mighty Mo”) Foley is a stalwart defender of “the small court.” There are no ordinary litigations there; and nothing happens until the formal remand from the Elevenses is borne into the loading dock at 400 Second Street, NW. So the First Request gets bounced. Stay on side, chaps.

Next, Karen A. Baumwoll, Docket No. 5142-19, filed 6/15/20. I would think this sort of thing happens more often, given the number of Form 6 Ownership Disclosure Statements that get filed, but this is the first Form 10 I’ve seen of that type. I’ll let Ch J Mighty Mo tell the story. “On June 17, 2020, petitioner filed a Notice of Change of Address, which is blank.” Order, at p. 1.

The self-employed health insurance deduction provides the 2% solution for Nelson G. Abrego and Reina E. Abrego, 2020 T. C. Memo. 87, filed 6/16/20. It’s Nelson’s $662 of self-employment income that saves the day.

Although eligible for Medicare, Nelson chose to go for the Affordable Care Act premium tax credit and signed up for private insurance. And even though he had run a small tax prep business for twenty (count ‘em, twenty) years and testified he knew when returns were due, his MFJ return for the year at issue was almost a year late, with no explanation therefor.

Nelson’s and Reina’s MAGI put them just over the 400% Federal poverty line, so their APTC (the advance funding of their tax credit, paid to their insurer) got clawed back, plus late filing and substantial underpayment add-ons, in the SNOD.

Judge Elizabeth A (“Tex”) Copeland takes up the tale.

“The Commissioner has since conceded that the Abregos are entitled to a self-employed health insurance deduction of $662, which lowers their actual [year at issue] HHI to $62,670, or 398% of the FPL.” 2020 T. C. Memo. 87, at p. 6. “HHI” is household income, as computed per the Affordable Care Act. And FPL is the Federal Poverty Level, likewise defined.

But there will be excess credit to be clawed back, so Nelson and Reina won’t get off paying nothing but the monthly excess they’d already paid during the year. Judge Tex Copeland lays out in copious detail the method of calculation, which I cannot paraphrase better than she does her own self.

“In plain English, the amount of PTC a taxpayer is entitled to is calculated by comparing the premium for the plan the taxpayer selected to a PTC amount calculated against a benchmark plan premium. If the actual plan premium is less than the calculated PTC amount, then the PTC will cover the entire plan premium.” 2020 T. C. Memo. 87, at p. 12.

But the exact arithmetic I leave to Judge Tex Copeland and to you. In the end, the clawback is the $2500 maximum in Section 36B(f)(2)(B)(i) for those who slide under the 400% tag.

While I take no political position here regarding the Affordable Care Act (on which more than enough electrons have been seriously inconvenienced), the statute proves that a camel is a horse designed by Congress.

Variation on a Theme

As I want to hear the rest of the Symphony Space reading of Ulysses this Bloomsday, I’ll refer the reader to my blogpost “Vot Did She Set?” 6/25/13, for the explication of the title hereof.

Judge David Gustafson has need of patience to tell IRS that he has already answered their request that he clarify his order of May 18 and the elements of the record in Richard E. Lacey II, 9761-16W, filed 6/16/20.

I didn’t blog the May 18 order when it was published, because it was allegedly uncontested, and seemed simple enough: put the court record into the administrative file.

But somehow IRS’ counsel managed to get confused.

“Respondent asks us to ‘clarify the Order dated May 18, 2020, and corresponding record’, but does not state what in our order he would like us to clarify.

“Respondent’s filing explains that in many cases the Court’s order would not be helpful (but we issued an order, not a rule for all cases) and that some sorts of filings should not be required to be sent (but the motion does not explain which ones). Respondent then reports that he did send to the WO the documents that it did not already have. We appreciate this compliance, but it leaves us not knowing what aspect of our order needs clarification. We conclude that what respondent wants is the opportunity for himself to correct errors in petitioner’s status report. Presumably he has done so in his motion. “ Order, at pp. 1-2 (Emphasis in the original).

But wait, as the midnight telehucksters say, there’s more!

“Respondent’s motion concludes: ‘Respondent contacted petitioner … to ask whether he objects to the granting of this motion. The parties engaged in a discussion to clarify any misunderstanding. Petitioner does not object to the granting of this motion.’ However, petitioner’s response…states that he ‘most strenuously does object to the granting of said motion”. Petitioner then gives his own account of the parties’ communications. Thus, both parties have now put into the record the information that they wanted to appear in the record.” Order, at p. 2.

Motion for clarification denied as moot, but the parties should continue sending status reports. Maybe Judge Gustafson needs more amusing reading. And I need more amusing blogfodder.

All y’all will indubitably recall Fritz Steven Schwager, 2020 T. C. Memo. 83, filed 6/15/20. You don’t? How fleeting is fame. Well, to refresh your recollection, see my blogpost “End Taxation Without Representation,” 5/31/19, wherein Judge Patrick J. (“Scholar Pat”) Urda gave the right-about-face-and-march-out to Fritz’s wannabe advocate Eddie, who was neither a Tax Court admittee nor on the short list therefor. But Scholar Pat did promise Fritz that which the title hereof asserts.

Fritz got it. Having unloaded several bushelbasketsful of protester jive (the payroll tax gambit, the Form 23-C, Assessment Certificate–Summary Record of Assessments ploy, the Paperwork Reduction Act fiddle, the jailhouse lawyer narrow readings of “person,” individual,” and “taxpayer,” and assorted frivolities), Judge Scholar Pat warns Fritz that Section 6673 is alive and well, and that frivolity chops await the wits, wags and wiseacres who tread the paths of frivolity.

“We will not painstakingly document every groundless argument advanced by Mr. Schwager, or dignify them with reasoned analysis, for doing so might be misinterpreted as suggesting that they have some colorable merit. See Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984); Grunsted v. Commissioner, 136 T.C. 455, 460 (2011); see also Wnuck v. Commissioner, 136 T.C. 498, 510- 513 (2011) (explaining that addressing frivolous arguments wastes time and resources and delays the assessment of tax). They do not.” 2020 T. C. Memo. 83, at p. 14.

Apparently in Fritz’s earlier appearance, which I blogged heretofore, Judge Scholar Pat warned Fritz about frivolity. I omitted the warning. But Judge Scholar Pat reiterates same, throwing in threats of the “hefty fines authorized by section 6673.” 2020 T. C. Memo. 83, at p. 16.

Judge Albert G (“Scholar Al”) Lauber seems to be inviting this response from Coal Property Holdings, LLC, Coal Land Manager, LLC, Tax Matters Partner, Docket No. 27778-16, filed 6/15/20.

You’ll doubtless recall that the Coalholders got left in the Extinguishment Stakes when they tried to cash out their improvements ahead of the 501(c)(3). What, no? Then see my blogpost “Diamonds Are Forever,” 10/28/19.

We all know Judge Holmes’ love for appraisals, manifested in his celebrated Oakbrook dissent, for which see my blogpost “They Always Must Be With Us,” 5/12/20. I’m sure he was disappointed that the Coalholders’ 3,713 strip-mined TN acres, which they claim went from $32.5 million to $155.5 million in three (count ‘em, three) days, didn’t get a full-dress mix-and-match with dueling experts, willing buyers and willing sellers, and the whole corps de ballet.

But Judge Scholar Al is ready to give Judge Mark V Holmes his heart’s desire in this designated hitter.

“The remaining issue in this case appears to be whether petitioner is liable for a 40% accuracy-related penalty for a ‘gross valuation misstatement’ (or a 20% accuracy-related penalty in the alternative). See I.R.C.§6662(a), (b)(3), (e)(1), (h)(2). … respondent filed a second motion for summary judgment contending that there are no genuine disputes of material fact with respect to that issue. We will direct petitioner to respond to that motion.” Order, at p. 1.

IRS claims that the Coalholders’ before-and-after valuations ($160.5 before, $5 after) are bogus, because the highest-and-best use is as a coal mine both before and after. The easement prohibits surface mining, but reserves subsurface mining rights.

“Urging that the easement thus imposes no meaningful restriction on use of the Property, respondent contends that the value of the easement is zero. If that is true, petitioner would obviously be liable for the ‘gross valuation misstatement’ penalty.” Order, at p. 2.

So to avoid the 40% chop (valuing the easement for taxes at 200% of its proven value), the Coalholders have to prove that what they bought for $32.5 million was worth at least $77.75 million three (count ‘em, three) days later. Unless what they bought wasn’t bought at arms’-length.

So let the Coalholders show facts to prove that what they bought wasn’t at arms’-length; or if it was, how the FMV wasn’t $32.5 million; and show facts to prove how the value went up north of $77 million in three days.

Time for the Coalholders to echo the title of this blogpost.

The golfing term, when one player’s ball lies directly in the way of another’s, has migrated into any situation where a person’s performance is thwarted, whether or not another person has any part in thwarting.

I’ve commented extensively about how the COVID-19 lockdown at the Glasshouse has thwarted paper filers. True, the internet remains for filings other than petitions and amendments thereto. But not everyone has internet connectivity to hand; even if the public libraries and cybercafes were open and providing low-cost or no-cost internet service, I’d worry about putting Section 6103 info into a public router of dubious security, even using VPN software. And I’d never use a public computer; who knows what spyware got emplaced thereon?

Hence I’m puzzled by ex-Ch J Michael B (“Iron Mike”) Thornton’s order to IRS to move for summary J in Dardanius Anderson, Docket No. 231-19L, filed 6/15/20.

True, Dardanius lost partial summary J for a bunch of years before the lockdown. Here’s that order, which I didn’t blog. But IRS had problems with the Section 6330(c)(1) checklist for compliance with law and procedure for the most recent four (count ‘em, four) years at issue. So Dardanius is down five for nine. Ex-Ch J Iron Mike ordered IRS to supplement their answer with a SNOD or showing why a SNOD was unnecessary for those years, plus any Boss Hossery for the chops.

IRS filed something in March, and ex-Ch J Iron Mike then ordered Dardanius to respond by April, but by that time the Glasshouse doors were locked up tight. And all ex-Ch J Iron Mike has to say about the internet is the boilerplate encouragement to register for eAccess.

So neither ex-Ch J Iron Mike nor I know whether Dardanius snail-mailed a response, and if he did, what happened to it.

Nevertheless, ex-Ch J Iron Mike tells IRS they “…file a motion for summary judgment or any other appropriate dispositive motion.” Order, at p. 1.

Maybe if Dardanius snail-mailed his response to IRS as well as to ex-Ch J Iron Mike, IRS can attach same to such motion, if they got it.

I know judges want to move their dockets along, and that they’re just as frustrated and stymied as the rest of us who are locked down. But if IRS moves, gets summary J, and Dardanius in fact snail-mailed a response timely, then there’ll be a vacation motion, and the work to do all over again.

I didn’t want to waste much time on Judge Elizabeth A (“Tex”) Copeland’s designated hitter today.  I have a minor jollification on the program this evening, and blogging another busted Rule 155 rehash is way down the list.

Mark Alan Staples, Docket No. 6560-18, filed 6/12/20, wants a new trial. He didn’t do so well on the first one; see my blogpost “You Can’t Lose,” 3/11/20. Judge Tex Copeland retitles this as a motion to reconsider per Rule 161. Mark Alan is 29 days late, and could get bounced for that, but Judge Tex Copeland plows through Mark Alan’s objections anyway.

“Mr. Staples sets forth a litany of dubious grievances. In brief, Mr. Staples main allegations are that the Court made errors of fact relating to realized and unrealized income; violated its jurisdiction regarding employee benefit entitlement issues; violated his 1st, 5th, and 14th Amendment rights; and is prejudiced against him as a pro se petitioner.” Order, at p. 2.

“As to his curt references to Constitutional free speech and due process violations, they are belied by the protections set forth in our Rules 155 and 161, allowing Mr. Staples an avenue for contesting our findings of facts and opinion and allowing him to present his computations of the proper tax deficiency to this Court. The remainder of Mr. Staple’s [sic] motion discusses a mathematical formula for calculating the previously disallowed loss and rehashes previously rejected legal arguments. As such, we will not revisit this.” Order, at p. 3.

Mark Alan also wants to wild-card in three (count ‘em, three) years not before the Court.

Mark Alan’s Rule 155 numbers repeat the losing argument. But IRS’ numbers sum the whole thing up.

“Respondent’s computations have as their starting point the concessions by petitioner that he received $10 in taxable interest and $4,648 from an IRA distribution. The remaining computations are mathematical, based on the increased taxable income conceded. Respondent’s computations calculate a deficiency of $1,635; they highlight underreported withholding of $929 and an advance payment of $742 (treated as a deposit), which amounts will offset the deficiency amount and any interest due on the deficiency. According to respondent, the offsets leave Mr. Staples owing 28 cents after application of interest. We find respondent’s [year at issue] deficiency computations to be consistent with our Memorandum Findings of Fact and Opinion.” Order, at p. 5.

Twenty-eight cents? Don’t spend it all in one place.

Though attributed to Ben Franklin, the hundred-dollar man, the famous quotation is said to be older by at least 70 (count ‘em, 70) years. But the short version leaves out the most important part: “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” Letter to J-B Leroy, 1789.

That obliging jurist, Judge David Gustafson, grappled with the famous dictum yesterday.

I missed blogging it because, septuagenarian that I am, I was untimely ripp’d from my beloved, deceased flip-phone, and thrust into the current century. One of my nearest and dearest, taking pity on an old man. bestowed upon me her old iPhone 8+.

The complications, anfractuosities, labyrinthine and Byzantine turning and turning in the widening gyres of the mind of Steve Jobs embodied in this rosegold colored device has made the simple act of dialing the telephone rather more complicated than the first Lunar landing and the rescue of Apollo 13 combined. And I know this Pandora’s Box has more computing power than every computer in America combined had in 1962, when I first studied computers.

Howbeit, at long last, here is the sad story of Alan Rainwater and Susan Rainwater, Deceased, Docket No. 4277-19, filed 6/11/19.

I’ll let Judge Gustafson tell it in his own plain way.

“The Court has received the parties joint status report…which describes the progress in the case. The Court appreciates the parties’ work so far in developing the case. The Court acknowledges the importance of the wrongful-death suit that petitioner Alan Rainwater is undertaking, but asks that Mr. Rainwater not let that undertaking halt the progress of this case.” Order, at p. 1.

Although Judge Gustafson appreciates your efforts so far, report every 60 days how you’re doing.

For even the most obliging jurist at the Glasshouse, though both are certain, don’t forget the taxes.

We all know the 24-second rule and the 5-second rule, but as we had no March Madness of the kind we know and love this year, but only a March Madness of a much worse kind than we could have imagined, perhaps we forgot.

Judge Albert G (“Scholar Al”) Lauber has today’s take on the 24-hour rule in Alexander Strashny and Laura Strashny, 2020 T. C. Memo. 82, filed 6/11/20. Alex and Laura are up on a CDP, claiming they should have been given an IA because they could pay in six (count ‘em, six) years.

Sure they could.

“They reported annual wages exceeding $200,000 and were withdrawing an additional $19,000 per month (or $228,000 annually) from their cryptocurrency account. They supplied no evidence that they were unable to withdraw from that account sufficient additional sums to pay their tax liability in full.” 2020 T. C. Memo. 82, at p. 8.

The monthly $19K goodies came from the Strashny stash of $7 (count ‘em, $7) million in cryptocurrency, 2020 T. C. Memo. 82, at p. 3. And they owed about $1.1 million in uncontested liabilities.

Gotta hand it to their trusty attorneys, Jeremy and Michael, to whom I award a Taishoff “good try, third class.”

Note the dates.

“In their motion for summary judgment petitioners urge that the IRS erred in issuing the notice of intent to levy while their Form 9465 request for an IA was pending. In so contending they rely on section 6331(k)(2), which provides that no levy shall be made while a taxpayer’s request for an IA ‘is pending with the Secretary’ or (if such request is rejected) ‘during the 30 days thereafter.’ See also IRM pt. 5.14.1.5 (Mar. 4, 2011). But while section 6331(k)(2) ‘bars the IRS * * * from making a levy’ during this period, ‘it does not bar the IRS from issuing notices of intent to levy.’ Eichler v. Commissioner, 143 T.C. 30, 37 (2014). Unlike a levy itself, a ‘notice of intent to levy * * * is merely preliminary to a collection action, rather than a collection action barred by section 6331(k)(2).’ Id. at 38.” 2020 T. C. 82, at pp. 8-9.

For the backstory on Eichler, see my blogpost “It’s Only a Notice,” 7/23/14.

But the kicker is the 24-hour rule above-cited.

“Finally, petitioners contend that the IRS failed to comply with an IRM provision stating that a taxpayer’s request for an IA should be recorded within 24 hours of receipt. See IRM pt. 5.14.1.3(3) (July 16, 2018). This provision is apparently designed to prevent inadvertent violations of section 6331(k)(2) by ensuring prompt posting of IA requests.” 2020 T. C. Memo. 82, at p. 9.

But the Form 9465 IA request was mailed July 24, and reached the IRS Service Center on July 27, a Friday that year. The flailing datestampers thereat logged it in on the following Monday.

But mox nix, says Judge Scholar Al.

“Any error by the IRS in this respect was harmless in any event: No levy in violation of section 6331(k)(2) occurred, and petitioners received full consideration of their IA proposal during the CDP hearing.” 2020 T. C. Memo. 82, at pp. 9-10.

Anyway, the IRM creates no rights in taxpayers. The IRM contains “guidelines, aspirational goals,:” as certain other pirates have remarked.

I can’t remember the negotiating tactics guru who laid out the reasons why one should never offer to split the difference, but should always accept when the other side offered. Whatever the reasons, if everyone followed his advice, no one would ever offer to split the difference, so no one but Tax Court judges would ever split the difference.

Even in the hotly-contested scenic or conservation valuation wars, differences have been split at The Glasshouse. Splitting has crumbled only at the façades.

Today Judge Pugh does a couple splits (hi, Judge Holmes), worthy of the legendary Nicholas Brothers. Here’s Mary P. Nelson, 2020 T. C. 81, filed 6/10/20, conjoined with spouse James C.

Mary gifted and sold to the family trust her partnership interest in Longspar in two tranches. Longspar held stock in the family holding C Corp. Both partnership and C Corp being closely-helds, there needed to be valuations. The valuations were done post-transfer.

This results in the interests being a percentage rather than a flat dollar amount. Since exactly how what percentage of her interest was being transferred can only be reckoned once the value of the whole is determined. See 2020 T. C. Memo. 81, at pp. 19-21. There are drafting pointers here for the trusts & estates practitioner that well repay reading.

Next are the discounts for control. No one will pay the same to be a passenger as they would pay to be captain.

Come now the dueling experts, culminating with a 5% difference after all the mix-and-match Judge Pugh can manage.

She splits the difference.