Let’s all give a good, hearty Tax Court Observers’ welcome to Judge Emin (“The Eminent”) Toro, the latest addition to the Tax Court bench. Judge Toro brings hefty academic, judicial and white-shoe experience to this distinguished Court. I look forward to great orders and opinions from Judge Toro.

On a day with no opinions or designated hitters, I am thrown back on reflections on Tax Court practice and procedure. Joe Daniel Skelton, Docket No. 15412-19, filed 10/29/19, offers me one such. Ch J Maurice B (“Mighty Mo”) Foley tosses JD’s petition at IRS’ request, to which toss JD has no objection.

JD petitioned the usual eighteen-year bundle (tax years 2000 to 2017), and of course neither SNOD nor NOD was in evidence.

So why blog it? Because IRS asks for a Section 6673 frivolity chop, and Ch J Mighty Mo shows JD the yellow card. “Although an I.R.C. section 6673 penalty will not be imposed here, petitioner is admonished that the Court will consider imposing such a penalty in future cases commenced by petitioner seeking similar relief under similar circumstances.” Order, at p. 2.

Wherefore it might be inferred that JD was a Wit, Wag or Wiseacre, because he had earlier sent in a document bearing the unusual title “Affidavit of Lawful Claim of Title, Will, Execution of Will, Declaration of Status & Appointment and Standing Orders for the Trustees.” This document, however, is not available online, and your reporter hasn’t the slightest intention of trucking on down to The Glasshouse at 400 Second Street, NW, to enlighten you, dear reader, with its contents.

And JD thereafter filed a motion to dismiss for cause, leading one to conclude that at least one of the three Ws above-mentioned might be in play.

But I’d like to say a word about petitioning something that a Tax Court Judge mightn’t find to be a SNOD or NOD.

We all know that there is no form of SNOD mandated either by statute or regulation. Only the taxpayer, tax and year need be stated, and of course the contact info for TAS. NODs can issue for equivalent hearings (no right to petition), as well as the usual laundry list where the NOD plus petition is the ticket to Tax Court (worker classification, innocent spousery, revocation of 501(c)(3) status, whistleblowing, and passport-grabbing).

But how is the ordinary taxpayer to know which is which? See my blogpost “Fake Out,” 12/16/14, where an IRS letter that says they sent a SNOD when they didn’t, and to petition Tax Court if you disagree with IRS’ numbers, somehow isn’t a SNOD.  See a recent, like yesterday, example, my blogpost “Petition Everything,” 10/28/19, where a SNOD gave the same deficiencies for two related entities at the same last known address, but if the wrong entity petitions, the right entity gets tossed too late to petition.

And there is a plethora of orders tossing petitioners who petition one IRS-standard-issue piece of paper or another that isn’t a SNOD, or the right kind of NOD (remember, tax refund and child support levies aren’t tickets to Tax Court).

So before deciding a priori (as Judge Scholar Al or Judge Scholar Pat might say) that someone dropping a petition (and in JD’s case, even ponying up the sixty simoleons) is a Wit, Wag or Wiseacre deserving of The Yellow Card, maybe there is legitimate ground for confusion. Although in JD’s case, not so much.

The Mack Gordon-Harry Warren 1943 Oscar winner echoes through Tax Court, as Judge Paris goes to “preponderance of the evidence” and bids farewell to burden of proof where IRS folds an innocent spouser, but intervenor goes all-in.

Here’s Jane M. Lassek, Petitioner, and Michael E. Smith, Intervenor, 2019 T. C. Memo. 145, filed 10/28/19. It’s the usual; IRS folds one of two years at issue, intervenor opposes both years.

Petitioner goes one for two, as Judge Paris is down with the conceded year despite intervenor’s objections. The non-conceded year is a win for IRS and intervenor.

Like 98% of innocent spousers, it’s a fact-bound trudge through Rev. Proc. 2013-34 (which I’ve exhaustively blogged), and The Big Seven Factors. Taxpayer First plays no part, as no newly-discovered evidence.

The reason I’m bothering with this at all is stated in the title.

As far as Judge Paris is concerned (and I’m thinking she is speaking for her colleagues as well), where IRS folds and intervenor fights on, burden of proof is invariably irrelevant. So preponderance-of-the-evidence wins the day.

In this case, the question was the requesting spouse’s actual knowledge that the MFJ return understated income. Intervenor claimed requestor “had reason to know.” Not good enough.

“If, as here, all of the other requirements of that section [6015(c)] have been satisfied, then, as relevant here, the burden of proof is shifted to the Commissioner and relief is denied to the requesting spouse only if the Commissioner “demonstrates that * * * [the requesting spouse] had actual knowledge, at the time such individual signed the return, of any item giving rise to a deficiency”. Sec. 6015(c)(3)(C); see Charlton v. Commissioner, 114 T.C. 333, 341 (2000); Martin v. Commissioner, T.C. Memo. 2000-346, slip op. at 12-13.” 2019 T. C. Memo. 145, at p. 13.

But if IRS folds, where does the burden of proof go?

“An issue arises where the burden of proof shifts to the Commissioner in cases when the Commissioner favors granting relief and the nonrequesting spouse intervenes to oppose it. The Court has previously resolved this issue of burden shifting by deciding the case on a preponderance of the evidence as presented by all three parties. See Hollimon v. Commissioner, T.C. Memo. 2015- 157; Pounds v. Commissioner, T.C. Memo. 2011-202; Knight v. Commissioner, T.C. Memo. 2010-242; McDaniel v. Commissioner, T.C. Memo. 2009-137. “ 2019 T. C. Memo. 145, at p. 13.

And that’s what Judge Paris does, and I’ll wager one bucket of Modelò Negras that’s what her colleagues do, from now on. Invariably.

So we’ll never know if the burden of proof shifts to the intervenor, or stays with the requestor.

Takeaway- Intervenor, try your case as if IRS wasn’t there, because as far as Tax Court is concerned, they might just as well not be.

Coal Is Not

And coal has to be forever, or their conservation easement tanks. So says Judge Albert G (“Scholar Al”) Lauber in Coal Property Holdings, LLC, Coal Land Manager, LLC, Tax Matters Partner, 153 T. C. 7, filed 10/28/19.

The Coalholders donated 3,713 acres of strip-mined TN they bought three (count ‘em, three) weeks before to a qualified organization, three (count ‘em, three) days after an investor bought 99% of the Coalholders for $32.5 million, and claimed a $155.5 million deduction.

The aim was to let the land recover from strip mining by natural means, and prevent strip mining from ever happening again.

Problems: the deed allows the present oil and gas lease, and any mineral extraction that the lessee chooses to remain in place, provided the 501(c)(3) donee doesn’t reasonably object. And the gas wells and cellphone towers can remain. Plus underground lines, utility lines, “roads and/or driveways for vehicular access to areas of the Property on which the existing and additional structures and related ancillary improvements are and may be constructed.” 153 T. C. 7, at p. 10.

And if the easement is judicially extinguished (the only way it can be), then out of any proceeds, the  Coalholders first get FMV (based on a formula), plus the amount of “any prior claims,” with a savings clause that this cannot torpedo the easement.

And there’s the usual appraisal.

The formula would allow the 501(c)(3) grantee to come up short in the event of judicial extinguishment, plus the “prior claims” language could guarantee that result.

“The Conservancy’s [501(c)(3)] share of the proceeds would thus be reduced by any amounts paid in satisfaction of prior claims–e.g., claims against Coal Holdings by the oil and gas lessees or cell tower operators–even if the easement’s fair market value were determined exactly as the regulation requires.” 153 T. C. 7, at p. 32.

The savings clause is a condition subsequent, and a dead loser. The Palmolives got torpedoed by a similar clause.  See my blogpost “No Joy Forever – Because Golsen,” 3/11/17.

Just when you thought the Coalholders had gone the limit, here’s the kicker.

“Petitioner discerns no fault in the ‘prior claims’ provision, asking rhetorically:  ‘How else would prior claims be addressed?’  It is not necessarily unreasonable for a deed to provide that prior claims may be paid from sale proceeds. What is unreasonable, and what violates the ‘judicial extinguishment’ regulation, is the requirement…that all prior claims be paid out of the Conservancy [501(c)(3)]’s share of the proceeds, even if those claims represent liabilities of Coal Holdings.” 153 T. C. 7, at p . 32, footnote 5. (Emphasis by the Court).

Ya gotta love these facts, and the gang that petitioned with a straight face. Tungsten? Titanium? You pick it.

Even Someone Else’s SNOD

What’s in a SNOD? My battle-hardened readers will respond, “year and tax. Everything else is commentary.” Well, there’s more than that, as ex-Ch J L Paige (“Iron Fist”) Marvel tells U. S. Auto Sales, Inc., 153 T. C. 5, filed 10/28/19.

“Petitioner is a corporation whose principal place of business was in Georgia when it petitioned the Court.  Petitioner and U.S. Auto Finance, Inc. (U.S. Auto Finance), are related entities which share a mailing address and are represented by the same counsel.  Petitioner and U.S. Auto Finance filed separate income tax returns for taxable years ending (TYE) June 30, 2003, 2007, and 2008.” 153 T. C. 5, at p. 3.

IRS unloads eleven (count ’em, eleven) pages of SNOD on Sales. But only four pages pertained to Sales, and the remaining seven pertained to Finance. And the identical alleged deficiencies ascribed to Sales in the front four got ascribed to Finance on the back seven. Sales petitions.

Then two months later, IRS unloads a fresh SNOD on Sales, with widely different deficiencies ascribed to Sales only. Sales petitions this one.

IRS wants to toss Sales’ first petition, because IRS meant Finance only, so Sales is the wrong party and no jurisdiction. I think IRS meant “no standing to sue,” a subset of no jurisdiction. “No standing” means “not your pig, not your barbecue.”

IRS puts in the tax returns of Sales and Finance for the years at issue, showing all the numbers in the SNOD at issue relate to Finance, and have nothing to do with Sales.

The rule here is cited in a case I didn’t blog. Basically, if the recipient of a SNOD can tell it’s a SNOD, and is directed to said recipient, that’s it, the recipient can petition. “But if a notice is ambiguous, the party seeking to invoke our jurisdiction must establish both that: (1) ‘the Commissioner made a determination’ as to the taxpayer and (2) ‘the taxpayer was not misled by the ambiguous notice.’ Failure to meet either test results in a conclusion that the notice is invalid.” 153 T. C. 5, at p. 8. (Citations omitted).

And Tax Court can use extrinsic evidence to resolve an ambiguous SNOD. Thus, reading the first SNOD, one can tell the years and the taxes, but first it says Sales owes and then it says Finance owes. The key is the separate tax returns for Sales and Finance. Reading the first SNOD against its tax returns for the years at issue, Sales had to know that Finance was meant, not them.

Besides, Sales petitioned the second SNOD timely, so Sales wasn’t prejudiced.

Finally, it’s true that there’s no standard form for a SNOD, but besides the year and the tax, the SNOD has to tell the taxpayer that it is in fact their tax and their year. This SNOD is so ambiguous that it isn’t a SNOD, at least as to Sales. But it might be valid as to Finance, since Sales and Finance share last known addresses. And mistakes in addresses don’t necessarily invalidate SNODs; see my blogpost “Name and Number,” 6/9/11.

Takeaway- In this context, if you have any related entity whatsoever named in a SNOD sent to you, they should petition and you should petition. Finance may have missed the boat, since the SNOD sent to Sales was sent to the last known address of Finance. And because who knows what an unambiguous SNOD is, petition everything anyway (just hold off the $60 until you have to send it).

It was Thomas Jefferson, to whom was ascribed the statement concerning lawyers, that they are those “whose trade is to question everything, yield nothing, and talk by the hour.”

Well, today Judge Kerrigan takes twelve (count ’em, twelve) pages to knock out the asserted Section 6662(h) 40% chops to Eaton Corporation and Subsidiaries, 153 T. C. 6, filed 10/28/19, which has to be a record-breaker for brevity in a seven-year-old case that has produced some great blogfodder.

IRS canceled some APAs (advance purchase agreements, sort of PLRs for transfer pricing situations, avoiding Section 482 adjustments), which Judge Kerrigan reinstated, because IRS was arbitrary and capricious. See my blogpost “Breaking Bad,”7/26/17.

Eaton and IRS are at the Rule 155 beancount, and the only thing they’re fighting about is penalties. Thus, thirteen (count ‘em, thirteen) lawyers for Eaton, and nine (count ‘em, nine) lawyers for IRS, are necessary to help Judge Kerrigan wrap it up in twelve (count ‘em, twelve) pages.

IRS wants the penalties because Section 482 adjustments would shatter the $20 million or 20% of gross ceiling that Section 6662(h) requires before the 40% chop, which exceeds the standard 20% understatement. Eaton claims that’s new matter, IRS had the burden of proof, and they didn’t sustain it.

Judge Kerrigan doesn’t care.

“We do not need to decide whether the imposition of section 6662(h) penalties is a new issue for the purposes of Rule 155.  Even if we were to assume, for purposes of argument, that this is not a new issue, we nevertheless would conclude that there were no net section 482 adjustments to support imposition of section 6662(h) penalties.”  153 T. C. 6, at p. 9.

Remember, the APAs were never rightly canceled.

“In this case we did not address whether there was an abuse of discretion regarding a section 482 allocation.  We never reached that step.  Rather, we addressed whether it was an abuse of discretion for respondent to cancel the APAs.  Because Eaton II concluded that the cancellation of the APAs was an abuse of discretion, the APAs remained in effect.  There was no allocation of income and deductions by the Secretary pursuant to section 482 and no “net increase in taxable income for the taxable year * * * resulting from adjustments under section 482 in the price for any property or services”.  See sec.  6662(e)(3)(A).  Therefore, there was no net section 482 transfer price adjustment.” 153 T. C. 6, at pp. 11-12.

No 482 adjustments, no penalties.

Before retiring from the US Air Force, Hope Snead “attained the rank of first lieutenant” as a nurse. The Air Force pay couldn’t come close to her and her husband’s gross income from gambling for the three years at issue, namely, $513,939, $1,220,393, and $92,867. But their offsetting losses equaled their gains, so their deficiencies for those years didn’t aggregate $25K, and IRS drops both chops and additions.

But Hope wants their gambling losses above-the-line, like Sched C, rather than below-the-line, like Sched A. If so, Hope and hubby Jim would have no AGI. And no tax.

Judge Morrison goes off the bench in James E. Snead and Hope R. Snead, Docket No. 7556-18S, filed 10/25/19. It’s Hope’s story, and she claims to be a professional gambler. At the slots. Now it doesn’t take an old-time casino hound to know that “slot gambling has a negative value on a long-term, probabilistic basis no matter what strategy is used.” Transcript, at p. 8.

If you’re claiming you’re in it to win it and cart off the boodle in one of those plastic buckets, slots might could be not the way to go.

So we have Judge Morrison going with the “goofy regulation,” Reg. 1.183-2(b), and furnishing further material for me and my colleague, Peter Reilly, CPA, a hobby loss aficionado.

First is businesslike manner. Since if you play long enough, you can’t win at the slots (the payout is less than the odds, and strictly random), if you do it long enough to show continuity, you do it for fun, not profit.

Next, Hope spoke to some unidentified poker player (where skill does matter) and watched some videos. “However, we are not impressed with the idea that Mrs. Snead accumulated expertise in the field of slot gambling or engaged in significant consultation with experts.” Transcript, at p. 8. As mathematically no strategy, other than rigging the machines, could produce a net win over a long enough run of play, I also am unimpressed.

Hope spent a long time gambling, to the detriment of her family life. But she did hold down a full-time job, so spending time gambling doesn’t rule out treating it as a hobby.

Hope has no assets that could appreciate. And she had no success gambling; even though her winnings went up between two of the years at issue, her net didn’t. Her success as a nurse in the Air Force has nothing to do with slot machines.

She always lost. Though in one month in her biggest year she hit five (count ‘em, five) jackpots, “temporary winning streaks are to be expected given the high frequency with which she gambled and the random nature of slot payoffs.” Transcript, at pp. 9-10. And she supported herself on her Air Force pay.

Now personal pleasure is a key factor in the Goofy Reg Stakes. Hope claims she hadn’t any. “Gambling was not a pleasurable pursuit for Mrs. Snead but instead was a way to deal with mental anguish. That gambling was not a pleasurable pursuit but a way to deal with mental anguish does not suggest to us that Mrs. Snead gambled primarily to earn a profit.

“We hold that Mrs. Snead did not gamble primarily to earn a profit. She therefore was not a professional gambler. Other than their argument that Mrs. Snead was a professional gambler, the Sneads did not raise any other dispute about the determinations in the notice of deficiency with respect to their gambling activities.” Transcript, at p. 10.

I’ve often echoed Tax Court Judges, saying you don’t have to suffer to be in business for profit. But it seems that if you do suffer, it doesn’t help you if you don’t make a profit. Neither too much fun nor too much pain helps much in the Goofy Reg Stakes.

Hope and Jim claim some charitables, but fall at the $250 fence; no papers.

Hope and Jim also claim some miscellaneous itemized deductions (of the kind now deep-frozen by the TCJA of 2017, but still alive when Hope and Jim were trying for them), but the 2% AGI floor would wipe them out, because their gambling losses are below the line Sched As.

Takeaway- Ya gotta be really rich or really lucky to win at the Section 1.183-2(b) slot machine.

The words of Bill Danoff, Taffy Nivert, and John Denver in their 1971 hit is the story of Ricky R. Ressen & Rosalind Ressen, Docket No. 18959-18, filed 10/24/19, an undesignated off-the-bencher from Judge Morrison.

It’s really Ricky’s story, as he’s a peripatetic construction manager with a truck and an abode in MN. But unlike other years where Ricky stays in MN, for the year at issue Ricky has to move around. His employer reimburses him for some, but not all, of his travel expenses from MN to Ashburn, VA, Newport News, VA, and Salisbury, MD, where he manages constructions.

Ricky claims standard mileage unreimbursed business expenses, and for all but 2%, his records, which match those of his employer, jump the Section 274 strict substantiation hurdle. Even the 2% is uncertain, but Ricky has burden of proof, so Judge Morrison gives IRS the disallowance.

Ricky even paid $151K for a “mobile home” (Transcript, at pp. 3-4), on which he wants to deduct depreciation.

Probably a fifth-wheel, Judge. “He lived in the mobile home at the jobsites. He moved the mobile home using the truck when he had to move the mobile home.” Transcript, at p. 4.

IRS says Ricky has no tax home, because all his jobs were temporary, and his MN home was strictly for Ricky’s and Ros’ convenience.

No, says Judge Morrison, even though Ricky lived in MN for years, he has business reasons as well as personal ones for living there. “First, Minnesota was the state where he was licensed. Second, his house in Minnesota was where he kept his construction-related files. Third, Mr. Ressen worked on construction sites in Minnesota in years other than the year at issue. Thus, Mr. Ressen had an adequate business justification for
maintaining a home in Brainerd.” Transcript, at p. 9.

So Ricky gets the mileage.

But the depreciation is about what Ricky’s employer gave him for travel allowance.

“…the weekly payment Mr. Ressen received to cover lodging expenses corresponds to the depreciation of Mr. Ressen’s mobile home. Although it is possible that a portion of the weekly reimbursement for lodging expenses could be characterized as reimbursing Mr. Ressen for things other than the depreciation expense for the mobile home, we do not have enough information in the record to estimate what portion should be so characterized.” Transcript, at p. 19.

Ricky showed good faith, but the Section 6662(d)(1)(A) understatement chop was electronically-calculated, so no Section 6751 Boss Hoss sign-off necessary. The Rule 155 beancount will show if Ricky hit the five-and-ten.

I’ve gotten a lot of blogfodder from William Cavallaro, Donor, 2019 T. C. Memo. 144, filed 10/24/19. The last time around, Wm was jousting with IRS and their expert Mr B about $29.7 million Bill supposedly gifted his offspring when he and they merged their respective C Corps, and they got the intangibles in the wrong outfit. Wm claims Mr B was $6.9 million too high.

1 Cir bucked Judge Gustafson’s initial take back to him, because he said Wm had to prove his number was right. No, said 1 Cir, he has to prove IRS’ (Mr B’s) number was wrong.

Wm of course tries to retry the case, revive old theories that went down at first, and wildcard in new ones. Why not, says I. The worst that happens is what happens to Wm. Turns out Mr B got it wrong to the tune of $6.9 million in Wm’s favor. But that’s all.

I give Wm’s trusty attorney a Taishoff “Good Try, Second Class.”

First, the C Corp that Judge Gustafson found owned the intangibles is a finding that cannot be disturbed. Law of the case; 1 Cir didn’t disturb that finding, so can’t relitigate it.

Second, Mr B might have been mistaken, but he wasn’t biased. And some of what Mr B found caused IRS to back off in Wm’s favor. So Mr B doesn’t get tossed entirely.

Third, Mr B’s calculation of profit and his calculations of discounted cashflow aren’t arbitrary, since these methods are commonly used to value closely-held businesses.

Where Mr B’s numbers fall down is the 90th percentile he used vs the 88.3rd percentile profitability that Wm claims he should have used.

“The Cavallaros demonstrated (and the Commissioner acknowledged) that ‘[t]he RMA data on which he purports to rely reflect that a profit margin of 7.5% would place Camelot in the 88.3rd percentile’, not the 90th.  The Cavallaros and the Commissioner subsequently corresponded about how Mr. B. had arrived at the 7.5% value, and it became clear that Mr. B had attempted to extrapolate the 90th percentile through a method that was not statistically reliable.  Mr. B apparently believed that the underlying data was unavailable, so in his attempt to arrive at the 90th percentile, he employed a method that was not statistically correct.  He knew only the mean profit margin from the RMA data, 4.1%.  He assumed that the mean profit margin would not be that far off from the median or 50th percentile, so he inferred that the theoretical 100th percentile would be 8.2% and that the 90th percentile would be 7.38% (making the 7.5% figure that he employed in the profit reallocation calculation greater than his inferred 90th percentile).” 2019 T. C. Memo. 144, at p. 23. (Name omitted).

Wm’s trusty attorney yells ”deceptive and erroneous” and Judge Gustafson should toss Mr B entirely. IRS tries to save the game, claiming all Mr B did was try to make out Wm’s C Corp as a “top performer,” not anything specific. Judge Gustafson isn’t buying either.

Mr B insisted on 90th percentile throughout. But IRS caves that an adjustment must be made, dropping the value of what Wm gave the kids to $6.9 million less than what IRS and Mr B claimed.

As for the wildcards, 1 Cir wasn’t buying and neither is Judge Gustafson. With arguments and proof, as with much else, “use it or lose it” is the rule. Wm’s team went all-in on who owned the intangibles. If they had other stuff, they should have put in argument and evidence in support thereof, but didn’t.

1 Cir said Judge Gustafson had wide latitude. He isn’t going to toss Mr B (except for the percentiles) or let Wm retry this case. He did sustain the error alleged as to Mr B’s percentiles, and did find the correct amount of tax due, by reducing the amount claimed by IRS by the $6.9 figure.

Now go do a beancount.

Judge Albert G (“Scholar Al”) Lauber looked back to the last antecedent of the words “(with extensions)” and found that Roberta Borenstein, Docket No. 23559-15, filed 10/24/19, wasn’t entitled to a refund of the $33K she overpaid, because IRS hit her with a SNOD before she filed the return that everyone agrees accurately reflects the tax she owed.

This was the “flush language” of Section 6512(b)(3). For more about the syntactical tohubohu this engendered, see my blogpost “Lookback to the Last Antecedent,” 8/30/17.

Well, the Harvard Low Income Tax Clinic and the Philip C. Cook Low-Income Tax Clinic didn’t think so. And neither did 2 Cir, after the said Clinicians besought a reversal, and got it.

Here’s Borenstein v. Com’r, No. 17-3900, decided 4/3/19. While looking back to the last antecedent is a long-standing rule of construction, it isn’t an absolute, and 2 Cir managed to dig into enough legislative history to find that the 1997 amendment that added the flush language was intended to place nonfiling taxpayers who got late SNODs on equal footing, whether or not they applied for extensions they never used.

“The Tax Court’s interpretation of 26U.S.C.§6512(b)(3) results in differential treatment of taxpayers that the statute’s flush language was intended to eliminate: it would have had jurisdiction to grant Borenstein a refund if she had not been granted an extension for the filing of her return, but lacks jurisdiction because she obtained an extension that was not used. And if the Commissioner had mailed the notice of deficiency six months earlier, or six months later, the Tax Court would have unquestioned jurisdiction to grant Borenstein a refund under two‐year and three‐year look‐back periods, respectively. The Tax Court’s interpretation disclaims jurisdiction to order a refund simply because the Commissioner chose to mail the notice of deficiency during a (supposed) gap in the Tax Court’s jurisdiction in the second half of the second year after Borenstein’s extension period. But ‘there is no need to read [the flush language of §6512(b)(3)]‐‐a provision designed to benefit the taxpayer who receives an unexpected deficiency notice‐‐as giving the [Commissioner] an arbitrary right to shorten the taxpayer’s period for claiming a refund if that taxpayer has not yet filed a return, ‘thereby’ convert[ing] an intended benefit into a handicap.’” Decision, at p. 9 (Citation omitted).

You can’t be mechanical when Congress intended a benefit, and you have to read the IRC to benefit the taxpayer where the words manifest Congress’ intent, albeit inartfully. Creating a “black hole” because a taxpayer got an extension she didn’t use was hardly what Congress could have intended.

And look at Section 6511(b)(2)(A), where the statute says “equal to 3 years plus the period of any extension of time for filing the return.”

“In view of our obligation to resolve doubtful language in tax statutes against the government and in favor of the taxpayer, we conclude that ’(with extensions)’ has the same effect as does the similar language that existed in §6511(b)(2)(A) at the time of §6512(b)(3)’s amendment‐‐that is, the language expands the Tax Court’s jurisdiction to order refunds and credits.” Decision, at p. 10. (Footnote omitted, but it says, yeah, like IRS says, the analogy to Section 6511 is imperfect, but hey, “no analogy is perfect.” Decision, at p. 10, footnote 2).

Reversed and remanded. So Judge Scholar Al tells Roberta and her low-income crowd, and IRS to do the numbers to fork over Roberta’s $33K.

PS- I hate to spoil a good story, but since when is a $33K refund “low income”? That’s more than a wee bit above 400% of poverty where I come from.