The ongoing Oakbrook joust has ensnared yet another multifaceted conservation Section 170 in Kevin A. Sells, et al., Docket No. 6762-12, filed 11/13/19. All y’all will recollect the Reg. 1.170A-14(g)(6)(ii) validity kerfuffle, featuring 2500 (count ‘em, 2500) pages of comments when said reg was first promulgated.

What, no? Then see my blogpost “Technologically Challenged – Part Deux, 5/15/19. In fact, the conservation easement deduction is a hot topic with IRS; the online megablog Accounting Today had a piece on it yesterday.

Kev and the als may well have the Oakbrook issues, so Judge Mark V Holmes ordered supplemental briefing, lest these points be precluded from appellate review.

“Respondent duly filed a supplemental brief… in which he argued about the validity and application of the regulation that is being contested in Oakbrook. Petitioners have done likewise. …respondent moved for leave to file a first supplement to his reply brief. It shows the coordination of arguments across the spectrum of conservation-easement cases that the Court was encouraging. We will accordingly allow it to be filed. Respondent likewise moved to reopen the record to add the administrative record of the rulemaking. We don’t think this is quite the right pigeonhole—the record of an administrative rulemaking is a legal resource, and the Court’s request for its production in Oakbrook was analogous to asking a party to produce an unpublished opinion that couldn’t be found online. (In an ideal world, the administrative record would be on a website somewhere for all to access and cite, but it is so bulky that it has defeated our Court’s efforts to make it available online.).” Order, at pp. 1-2.

But the record does get reopened. So maybe, just maybe, we will get the whole saga.

Gene Autry’s signature tune heralds both the return of the Orders Search feature on Tax Court’s website, and my Three Thousandth (count ‘em, three thousandth) post.

But today’s feature isn’t about horsey hobbyists. It’s about who is the in-crowd when it comes to client-attorney privilege. And STJ Peter Panuthos will tell us all about it, belatedly.

Here’s Estate of Ethel Bell Wright, Deceased, Susan Armistead, Executor, et al., Docket No. 5291-16, filed 11/8/19, just now back up on the website.

The late Ethel Bell and Susan A were surrounded by lawyers. The white shoes filled the floor. So when IRS hit Susan’s son Bill, who was in on the family’s trusts and business, with a subpoena DT, motions to quash (denied) and privilege logs went flying.

STJ Panuthos: “Respondent claims these documents are not protected by attorney-client privilege because there is insufficient evidence that petitioner or her son were clients of Mr. N. We examined the documents in camera and conclude that the attorney-client privilege does apply. However, we further conclude that the privilege has been waived with respect to these documents as an attorney-client communication “’concerning LeRoy and Ethel’s lifetime joint estate and business planning’, as referenced in paragraphs 23 through 26 of petitioner’s memorandum. While the extent of the waiver is not entirely clear, it is petitioner’s burden to establish that waiver has not occurred with respect to each document for which she is claiming privilege. She has not done so with respect to documents B-90 through B-99. Accordingly, these documents are required to be disclosed in the present proceeding.” Order, at p. 4. (Name omitted).

LeRoy was Ethel Bell’s husband, and he was Susan’s dad and sons Bill’s and Jim’s grand-dad.

Communications between lawyers, Susan and son Jim were privileged, because agency. Jim acted for mom Susan in a confidential relationship.

“We have examined the documents in question in camera and have concluded that an agency relationship does exist between petitioner and her son James with regard to the estate and the present litigation. The documents support petitioner’s contention that James actively acted on behalf of his mother in her role as executor to gather documentary evidence, obtain expert reports, and help select witnesses. Accordingly, communications between James Armistead and the estate’s attorneys are not required to be disclosed in the present proceeding as we do not conclude there was a waiver of the attorney client privilege under these circumstances.” Order, at p. 6.

Bro Bill had little to do with the estate; all he was, was a witness. No privilege, third-party communication.

Work product fares little better. Whatever was privileged because of client-attorney is privileged here, and IRS didn’t make out a case for “compelling need” to get the stuff, as it could be gotten elsewhere.

Takeaway for lawyers—Be careful who you talk to. Warn clients about waiver of privilege: it’s not absolute, and getting to be less so every day.

And to Blackstone and the Glasshouse Gang: Thanks, it’s great to be back.

Got the callback. Walked the person through the problem. Was told that Blackstone the contractor has to rebuild the database. They are working on it, but a firm time for restart is not available at this time (3:08 pm EST). I am told there will be a red letter notice put up on the website while the rebuild-refresh goes on.

Further details when available.

This is a developing story.

11:10 p.m, EDT: The following appears on the Orders Search page: :

The Court‘s “Orders Search” function is not working properly for orders served on or after November 8, 2019. We are working to restore search capability as quickly as possible. We apologize for the inconvenience.

More to follow when available.

Generally, (don’tcha just love that word?), “…all reports of the Tax Court and all evidence received by the Tax Court and its divisions, including a transcript of the stenographic report of the hearings, shall be public records open to the inspection of the public.”

Except it isn’t. Even generally, it isn’t. Tax Court orders search is still down. More than 500 (count ’em, five hundred) orders, from the last two-and-one-half days, can’t be found, whether through orders search or even docket search.

So how does the public know?

I e-mailed and telephoned the Tax Court webmeister. The results of those are to be found in my blogpost “Updating Mark Twain,” 11/12/19.

But since today, 11/13/19, the orders search and the docket search are both of them broken, I telephoned to the chambers of Ch J Maurice B (“Mighty Mo’) Foley. I clearly identified myself as a journalist, and referred to this my blog.

Lest anyone be confused, I report all this.

I expressed my concerns. I was promised a callback. When I get it, I will report it.

In the meantime, may I explain (my readers will say I do nothing else) why this matters. Aside from any snail-mail pro ses who don’t have e-access and want to see what’s going on with their cases, Tax Court orders are where it’s at. It took me some time, but when I stated early on in this bloging life I lead that I would ignore small claimers and orders, I was utterly wrong.

If anyone wants to see the gears meshing (or grinding), the wheels turning (or screeching to a halt), and which way the smoke is blowing, the orders are essential. The Stealth Subpoena is just one example; all the discovery moves, all the variances between Tax Court Rules and FRCP, all the gambits, are in the orders.

If you’re trying to figure out Tax Court law and practice by reading between the lines of published opinions and designated orders, all you will see is white paper. Many orders that should be designated aren’t. Most opinions feature tax law; Tax Court procedure is definitely a long way behind, if it gets there at all.

Shut down the orders search function, and I might as well pick up this electronic soapbox and go home.

So what price Section 7461?

“No man’s life, liberty or property is safe while the Legislature is in session.” Whether it was Benjamin Franklin, New York County Surrogate (that’s probate judge to you Kansans) Gideon J. Tucker, or Mark Twain who first said it, the sentiment is true.

But it wants updating.

On Friday I reported the Orders page on the Glasshouse website was substantially kaput to the extent of more than 200 orders, with broken links or no links. See my blogpost “208 Orders,” 11/8/19.

After having marched yesterday, while Tax Court was closed, I returned to my online muttons this morning. I found about 100 orders, and zero links. So, notwithstanding my reluctance to do a phoneathon with the webmeister or his delegate, I called Tax Court’s public number and got put through to the individual.

I told him I’m a journalist and need to search the orders. That obviated the usual half-hour search for my Tax Court attorney number. It also told him that, as I am a journo, I report this stuff.

The story I got is that a contractor is working on the website, to improve the search features. It seems the contractor’s ministrations may have had the unintended consequence of taking out the links. The webmeister told me that he would get with the contractors to get us re-linked. “A consummation devoutly to be wished.”

The update?

“No one’s life, liberty, property or website is safe while the contractors are at work.”

Tax Court was closed. I marched.

The Tax Court website has neither opinion nor designated orders today, 11/8/19. To make up for the deficiency, there are 208 orders (so far, as at 3:10 p.m.) listed.

But the texts of rather more than half cannot be accessed, as the links to them are broken.

I have no intention of repeating my efforts from February, 2018, as more particularly bounded and described in my blogpost “Entropy,” 2/5/18.

If anyone wants to see an order and can’t find it, do a docket search.

Have a nice weekend.

Judge Gale has a designated hitter for us, dealing with responsibility and bankruptcy. It’s a useful refresher for the Section 6672 TFRP chop when the entity, not the responsible person, is in bankruptcy.

Christopher B. Scott, Docket No. 10487-18L, filed 11/7/19, has double trouble. He has two entities, both of which owe FICA/FUTA/ITW and both of which are in bankruptcy.

Although Chris wants to contest liability, he proffers no evidence to support said contest. And the SO gave him a reasonable time to submit same.

Chris wanted more time to submit two delinquent personal tax returns, but as he proposed no collection alternatives, even had he submitted those returns, it would not avail him.

On to bankruptcy.

Judge Gale: “Petitioner’s position that it was inappropriate for respondent to pursue him personally for collection of the section 6672 penalties while the business entities for which he was being held responsible were in bankruptcy is also unavailing. Respondent ‘is not obligated to collect taxes from an employer’s corporate assets or from its bankruptcy estate before collecting a trust fund recovery penalty from the responsible person.’ Bishay v. Commissioner, T.C. Memo. 2015-105, at *20 (citing Frank v. D’Ambrosi, 4 F.3d 1378, 1386 (6th Cir. 1993)). Although respondent’s general policy is not to pursue collection of trust fund recovery penalties from an individual taxpayer while a liable business entity is in compliance with a bankruptcy plan that provides for full payment of the delinquent taxes, see Internal Revenue Manual pt. 5.9.8.10(1) (Sept. 29, 2015), the SO confirmed that neither [Entity One] nor [Entity two] was in compliance with its bankruptcy payment obligations. The SO consequently did not abuse her discretion in determining that the collection action against petitioner should be sustained.” Order, at pp. 8-9.

When it comes to being obliging, he’s hors classe. He’ll bring coffee and doughnuts to calendar call, and feed the parking meter while you wait; he‘ll try your case in the slammer wherein you languish; he’ll draft your papers, make your motions, suggest your legal strategies, all at no extra charge. I’ve blogged all these in the past. Of course, that be none other than that Obliging Jurist, Judge David Gustafson.

And he’s on his game today with Gramercy Financial Group LLC, Cerro Negro Capital Management, LLC, Tax Matters Partner, Docket No. 25760-17, filed 11/7/19. As you can tell, it’s another TEFRA holdover, and the TMP and a couple other partners (hi, Judge Holmes) are joining with IRS in a motion to enter decision, based upon a stip they laboriously hammered out with IRS.

One partner, Fereneze, sat on the bench during the game. But when confronted with the stip, Frerenze moves to participate out of time…well out of time.

The TMP and others object; they claim their hard-fought settlement would be endangered if Fereneze came in now.

I believe the TMP: the settlement hits Fereneze with $2.7 million of ordinary income. The settlement stip recharacterizes a $9.2 million guaranteed payment as a $10.9 million distribution of property to Fereneze.

Hinc illae lacrimae (I need not, of course, translate).

Fereneze claims the TMP and the participating partners froze Fereneze out of the settlement negotiations and sold Fereneze down the cliché. So for sure if Fereneze jumps into the pond and muddies the waters, the settlement may go down.

Shades of poor old Beverly Bernice Bang; see my blogpost “Bang – A Warning to Tax Matters Partners (and their advisors)”, 1/5/11.

Judge David Gustafson to the rescue: “This Court has held that a partner who did not have sufficient opportunity to participate in procedures leading to a proposed settlement and motion for decision under Rule 248(b) was allowed to participate pursuant to Rule 248(c) after the filing of the Commissioner’s motion for entry of decision. We think that such participation is further warranted when the proposed settlement–negotiated and agreed upon by the other partners–includes recharacterizing a $9.2 million partnership expense as a $10.9 million distribution to be allocated to the previously nonparticipating partner. We think sufficient cause has thus been established.” Order, at p. 3 (Citation omitted).

But all is not lost for IRS, the hard-negotiating TMP and the other participating partners.

“With regard to such participation resulting in prejudice to the other parties, Fereneze …points out that it does not intend to challenge the remaining six items the parties have agreed on in the proposed settlement, so the efforts exerted towards settling those items would not be wasted by allowing Fereneze…to participate. This may be true, though the Court notes the possibility that one or more of the parties’ willingness to settle those six items may have depended on the resolution of this $9.2 (or $10.9) million issue. However, the other parties do retain their option to settle the case under Rule 248(c) even if Fereneze…does not wish to enter into the settlement.” Order, at pp. 2-3.

Roger that, Judge. The other partners might not be so gung-ho to settle if they have to eat all or part of the $2.7 million.

Two takeaways- Tax matters partners (and maybe representatives under the new post-PATH partnership regime) are hereby again reminded they’re partners first, and tax matterers second. As Justice Benjamin Nathan Cardozo remarked, a fiduciary “is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.”

Second, the old wheeze is still true: the only thing two partners can agree upon is how much a third partner should pay.

As my blogposts, and Judge Mark V Holmes’ order, all more particularly bounded and described in my blogpost “Change the Rules,” 7/2/19, have vanished into the æther, leaving “not a rack behind,” as a much finer writer than I put it, counsel for Reflectxion Resources, Inc., Docket No. 12017-16, filed 11/6/19, goes on the offensive.

“…petitioner filed a motion (Doc. 70) asking the Court to modify its order of that same date. In particular, petitioner asks the Court to require that a party serving a subpoena on a non-party give advance notification thereof to the opposing party as provided in Federal Rule of Civil Procedure 45(a)(4).” Order, at p.1.

I didn’t blog the order Judge David Gustafson referred to, as it only says the parties are to follow their agreed-upon discovery schedule. But apparently that schedule was prepared without thought to the FRCP Rule 45(a)(4) vs TC Rule 147(d) jumpball.

Now I do not arrogate credit to myself for this well-played move by a canny litigator from a prominent law firm. I am sure counsel thought outside the Bockius (sorry, guys) and came up with this unaided.

But maybe, just maybe, when IRS answers as Judge David Gustafson obliges them to do, they will stop the games and announce that, now and forever, they will notify parties when they subpoena non-party witnesses, just like the FRCP 45(a)(4) says, despite the lethargy at 400 Second Street, NW, on that score.

As that much finer writer remarked, “’tis a consummation devoutly to be wished.”