See my blogpost “Repeat Business,” 5/3/18. Once again my prediction comes true; I said then that I was sure these players would be back again, and Michael C. Worsham, 2019 T. C. Memo. 132, filed 10/1/19, certainly fills the bill.

Take a look at my blogpost above-cited, and the blogpost therein referred to, for the backstory on Mike.

Mike’s got the usual protester “basis in labor” and “undelegated signer” arguments, that fall flat. I won’t go over them here.

But Mike has a new one: Section 6673 is unconstitutional because, says he, it inhibits Mike’s free speech.

I’ll let Judge Colvin take this one.

“First, section 6673 does not apply to, and therefore does not discourage, legitimate arguments.  There is no constitutional right to litigate frivolous claims without being sanctioned. Banat v. Commissioner, 80 F. App’x 705 (2d Cir. 2003); Sterner v. Commissioner, 867 F.2d 609 (4th Cir. 1989); Dixon v. Commissioner, 836 F.2d 546 (4th Cir. 1987), aff’g T.C. Memo. 1986-563; Larsen v. Commissioner, 765 F.2d 939, 941 (9th Cir. 1985).  Second, petitioner cites no authority holding that it is unconstitutional for a sanction to apply unequally to taxpayers and the government, and section 6673(a)(2)(B) authorizes the Court to impose costs on Government counsel who engage in unreasonable and vexatious litigation. Section 7430 entitles taxpayers, but not the Government, to payment of litigation expenses under certain circumstances.  Petitioner cites some rules from other courts which apply to both parties, but the existence of those rules does not address the constitutionality of a statute which does not apply equally to both parties.  Thus, we hold that section 6673 is not unconstitutional.” 2019 T. C. Memo. 132, at pp. 14-15.

But stick around. IRS moved for Section 6673 chops, and Judge Colvin will deal with that separately.

Judge Elizabeth A (“Tex”) Copeland had a timeline to unravel in Tramy T. Van, Docket No. 4460-17, filed 10/1/19, and it’s quite a tangled one. Seems that there were three (count ‘em, three) separate SNODs, spread over two years. Only two of the SNODs touched the year Tramy is petitioning. But Tramy claims she’s petitioning all three years covered by the three SNODs, even though she never received any.

IRS sent them to Tramy’s last known address, which was the address only of ex-husband Danny Chan. Tramy filed two petitions, but the second of them was tossed because it petitioned the first of the three SNODs, which had been mailed to last known address two years before (although IRS couldn‘t find the certified mail list, claimed at first that the petition was valid, and tried to toss Tramy’s second petition as duplicative).

So Tramy’s petition 1, petitioning SNOD 3, is timely. Clear? Thought not.

But is it a petition? “To be treated as a petition from a particular notice of deficiency, the document filed by taxpayers within the 90-day period must contain some objective indication that the taxpayer contests the deficiency determined by respondent against the taxpayer.” Order, at p. 6. (Citations omitted).

And the petition (or an amendment thereof) must let IRS know something about what bœuf the petitioner has. “Further, our Court Rules provide a petition must be ‘complete so as to enable ascertainment of the issues intended to be presented.’ Rule 34(a). ‘[T]he propose [sic] of [a petition, along with other pleadings filed in this Court] is to give the parties and the Court fair notice of the matters in controversy and the basis for their respective positions.’ Rule 31(a).” Order, at p. 6.

“Propose”? Somebody needs to proofread these orders.

Well, Tramy seems to have got it right. “In paragraph six of Petition #1, petitioner contests ‘all’ changes to her [year at issue] return with respect to her as an individual and her two businesses, Tramy Beauty School (Partnership) and Tramy Beauty School, Inc. (S Corp).” Order, at pp. 6-7.

Now just because she didn’t get the SNOD in the mail doesn’t preclude Tramy from contesting the year covered by the SNOD, or any interrelated year (a NOL carryforward from the year at issue got disallowed in the SNOD she petitioned).

I’ll let Judge Tex lay it out.

“Under our precedent, Notice #3 was deemed to be received by petitioner because it was mailed in accordance with section 6212(b). This safe harbor, however, does not prevent petitioner from access to the Court because she was unaware of a deemed received notice when she filed Petition #1. Rather, we use a snapshot in time approach; petitioner explicitly contests any redetermination with respect to [year at issue] in Petition #1; she observed that a year at issue in the notice she actually received are interrelated to [year at issue], and as such, brought it to respondent and the Court’s attention. Stated differently, in the Petition #1 case, respondent’s Notice #3 is valid, petitioner contested respondent’s redetermination within 90 days of such notice, and although she asserts she did not receive a [year at issue] notice, in Petition #1 she explicitly contested ‘all the IRS’s changes to the tax returns examined for the applicable tax years ending [year at issue] through [year three].’ Thus, the Court has jurisdiction over the [year at issue] in the Petition #1 case because it satisfies the statutory requirements under sections 6212(b) and 6213(a), and contains an objective indication that petitioner asked us to redetermine the deficiencies respondent determined against her for the [year at issue.” Order, at p. 7.

Judge, I wish you’d designated this order. There’s stuff here that practitioners should know.

I would now embark upon a lengthy diatribe about social engineering, using a mechanism for the designed for the collection of revenue as a welfare fund, and agitating for (or decrying) a comprehensive overhaul of the whole shootin’ match.

But as this blog is not a political one, I will merely refer my readers to the sad tale of Richard Alan Saunders and Shelia Candy Saunders, 2019 T. C. Sum. Op. 29, filed 9/30/19, while echoing the oft-used but unreliably-attributed phrase “no good deed goes unpunished.”

STJ Daniel A (“Yuda’) Guy has the message for IRS as hereinabove at the head hereof set forth (as my already-on-their-second-dirty-Grey-Goose-Martini colleagues would say), delivered via designated hitter,  Albert Carnesale & Robin Carnesale, Docket No. 25757-18S, filed 9/30/19.

It’s Al’s & Robin’s trusty accountant who sends in the check that kicks off the match. Al & Robin agree on the tax due, but want to contest the chops. Trusty accountant sends in check in reply to CP2000, stating “’[Petitioners] received the IRS notice CP2000 * * *. We agree with the changes of the tax liabilities. However, we would like to request that [the IRS] waive the penalty being assessed. * * * Payment for [the tax due] is enclosed with this letter in order to remedy the situation expeditiously.’” Order, at p. 1.

Well, that’s not how you do it per Rev. Proc. 2005-18, 2005-1 C.B. 798. Trusty accountant didn’t provide the 7.02 statement, showing what tax, what year, how calculated, and basis for belief trusty accountant is right.

So IRS wants to toss Al & Robin, as payment was a payment and not a deposit, hence no valid deficiency.

Howbeit, “…IRS recorded petitioners’ remittance as ‘Advance payment of tax owed’. No assessments were entered, however, for the tax, penalty, or interest proposed in the Notice CP2000, which left a credit balance in petitioners’ account. Contrary to the procedures established in Rev. Proc. 2005-18, supra, upon which respondent relies, petitioners’ remittance was not offset by a corresponding assessment of additional tax to which the ‘payment’ relates. See sec. 6213(b)(4).

“On this record, the Court concludes that respondent treated petitioners’ remittance as a deposit, not as a payment, and respondent did not assess additional tax equal to the amount of the remittance before issuing the notice of deficiency.” Order, at p. 2 (Citations omitted).

IRS and trusty accountant could have saved time by reading my blogposts “Which Is It?” 8/27/15, and “Went to Make a Deposit,” 10/5/16.

Before IRS can terminate an accepted OIC for failure of the taxpayer to stick to the straight-and-narrow for five (count ‘em, five) succeeding tax years post-acceptance, and make the taxpayer cough up the whole shebang (less what was previously paid), IRS must send a default letter, warning the delinquent to get with the pogrom.

Here, Brookhaven Appeals terminated without confirming issuance of default letter, and Judge Goeke won’t have that. See Coleman Moore, 2019 T. C. Memo. 129, filed 9/30/19.

Coleman claims he never got IRS’ billets doux. Moreover, the address on one of the checks he sent in to cover a late payment chop had his correct address on it, but his returns all had a P.O. Box, as did the 1040-V payment voucher that accompanied the check. Judge Goeke:  ”The address on this check is hardly clear and concise notification to respondent of petitioner’s change of address.” 2019 T. C. Memo. 129, at p. 27.

True, IRS can terminate an OIC for post-acceptance default. IRS may, but need not, allow a defaulter to cure, even though Coleman ultimately remedied every default. And even though his OIC got retro-bounced after he paid up the defaulted taxes, IRS can still terminate.

Except.

Both IRM Part 5 (exam) and Part 8 (Appeals) say there has to be the default letter before termination. And Coleman, a Caliifornian, is dealing with 9 Cir record rule.

“It is clear that the OIC was not terminated because of circumstances beyond petitioner’s control.  His default was his own doing.  He failed to carefully manage his income tax liabilities and filing obligations for five years after being granted a favorable OIC that was conditioned on his tax compliance.  He also failed to notify respondent of a change to his mailing address.  However, these failures on petitioner’s part do not excuse respondent’s failure to follow his own administrative procedures for terminating an OIC.  The administrative record does not contain a potential default letter providing an opportunity to cure the noncompliance.  If respondent did send a potential default letter to petitioner’s last known address, it is unlikely petitioner would have received it.  However, the administrative record does not establish that respondent sent a potential default letter to petitioner’s last known address.” 2019 T. C. Memo. 129, at p. 28.

Although Coleman did drop the ball a couple times (hi, Judge Holmes), IRS was not faultless.

“We have no way of knowing what respondent may have proposed for petitioner to cure the noncompliance if he indeed sent a potential default letter. What we do know is that petitioner cured the noncompliance promptly once he discovered that he owed additional amounts.  Notably, respondent did not revoke the release of the liens for the years at issue associated with the terminated OIC until after petitioner had already paid the income tax liabilities due, and he did not issue the notice of intent to levy at issue in the original and supplemental CDP hearings until over one year after petitioner had paid the tax.” 2019 T. C. Memo. 129, at p. 29. (Footnote omitted, but read it. It says the termination letter said Coleman failed to cure by a date certain, which seems to show that paying up cures the default in his case).

So Judge Goeke sends them back to appeals, recommending a new SO this time.

Paraphrasing the immortal words of Roger Christian and Brian Wilson, “Well I’m not bragging babe so don’t put me down, But I’ve got the fastest little blog in this town.”

Here’s that Obliging Jurist, Judge David Gustafson, playing catch-up, in Wendell C. Robinson & May T. Jung-Robinson, Docket No. 6446-19L, filed 9/30/19.

“Page 2 of our order of September 27, 2019 (Doc. 21), ironically reflected, in a paragraph describing ‘mathematical errors’, an incorrect figure resulting from an editing error by the undersigned judge. That paragraph should read:

However, the Commissioner’s response shows that the Robinsons’ return reflected six mathematical errors, that their correction increased the Robinsons’ tax liability by $13,267.20 to a total of $101,989.11, and that this larger total was timely assessed….” Order, at p. 1.

See my blogpost “Lawyers Can’t Add – Part Deux,” 9/27/19.

Sam T. Coleridge, That Is

Judge Mark V Holmes was busy today. But not so busy that, like Sammy Coleridge’s nautical immortal, he could not stop one of three.

Here’s Maria G. Leslie, Docket No. 15277-17, filed 9/27/19. This is the coda to a long-running saga, all parts of which have been resolved by trial, appeal or stip, save one last issue: what part, if any, of Maria’s legal fees in her ongoing despedida from her loved-once, Byron, may she deduct?

Maria claimed she had not legal capacity when she agreed to a split of Byron’s assets. Turns out Byron had another $50 million Maria wotted not of. Then Byron stashed $1.56 million in a trust fund for Maria that she couldn’t touch, but that she had to sue to get. Finally, Maria sued for breach of fiduciary duty in that Byron diminished her share of the community property estate (this is CA).

Judge Holmes gives Maria deductions for the legal fees in the second. The source of claim was directly alimony, taxable to Maria per Section 71. And Section 212, as then in effect, gave her the expenses-for-production-of-income.

But setting aside the agreed split of assets didn’t necessarily produce income, only a property split. “The origin of the claim for this litigation was an alleged flaw in the formation of the [settlement agreement], not a claim to more alimony under the [settlement agreement] or some other basis. Even if we focused on the consequences of this litigation, Leslie would lose because success wouldn’t directly lead to more… income, but only to the setting aside of the [settlement agreement]. The California Superior Court would have ordered a new division of marital assets. This division of assets — unless a separate agreement was reached — would have split all the community property and debts in half. And an action to divide community property is not an action for alimony.” Order, at p. 5 (unnumbered)(Citations omitted).

And the fiduciary duty impairment litigation falls for the same reason.  This arose from the marriage dissolution and the split of the community estate, not the grant of alimony. While maybe at close of play Maria would have gotten more alimony, it’s the source of the claim, not the downstream result, that determines deductability.

So Judge Holmes did Sammy C proud.

Once again I repeat the old tale.

Here’s Wendell C. Robinson & May T. Jung-Robinson, Docket No. 6446-19L, filed 9/27/19, from the wordprocessor of that Obliging Jurist, Judge David Gustafson, again helping out a tired old blogger with a designated hitter.

Wendell & May want partial summary J in this CDP. They don’t get it.

“The Robinsons’ motion shows that they reported on their [year at issue] tax return an income tax liability of $88,721.91 and paid that liability by withholding and by a check that accompanied the return. They argue that their… liability has therefore been paid in full, that the statute of limitations (section 6501(a)) bars further assessments, and that the proposed levy to make further collections … cannot be sustained.” Order, at p. 1.

IRS’ riposte seems to have a minor arithmetic glitch.

“However, the Commissioner’s response shows that the Robinsons’ return reflected six mathematical errors, that their correction increased the Robinsons’ tax liability by $13,267.20 to a total of $88,721.91, and that this larger total was timely assessed…. The Commissioner explains that these mathematical errors were corrected as such pursuant to section 6213(b)(1), which provides for a ‘notif[ication] … [that] shall not be considered as a notice of deficiency’.” Order, at p. 2.

Guys, $88,721.91 plus $13,267.20 does not equal $88,721.91. Even if you take off your gloves, your shoes and your socks, and lie on your backs with limbs in the air, $88,721.91 plus $13,267.20 does not “increase the Robinsons’ tax liability to a total of $88,721.91.”

Judge Gustafson finds issues of material facts here.

“The recitation of verification in Appeals’ notice of determination makes no mention of mathematical corrections under section 6213(b)(1), nor of whether the IRS ‘notified’ the Robinsons of such corrections in compliance with that provision so as to give them the opportunity to request abatement pursuant to section 6213(b)(2)(A) and thereby obtain the opportunity to resist the corrections under deficiency procedures. The Commissioner’s brief describes the alleged mathematical errors and cites section 6213(b)(1), but it makes no allegation about notification to the Robinsons or an opportunity to request abatement. We would expect to receive evidence on this issue in due course.” Order, at p. 2.

I would expect to see a motion to amend the answer, too.

I’ll tell ya, Fridays are days this blogger dreads. Tax Court never, but never, issues an opinion, not even a small-claimer, on Fridays. Most of the time, there’s a bushelbasketful of housekeeping orders, through each of which I must plod, trying to find something non-banal wherewith to amuse, if not instruct, my readers. Judges are loath to burden the hard-laboring clerks and flailing datestampers with designated orders, wherefore I must root through them all. So even if I find a “gem of purest ray serene” in the “dark unfathom’d caves” of Tax Court’s Friday’s undesignated hitters, the said readers are heading out for the weekend, and have zero time for this stuff.

And it’s worse, because this is the penultimate business day of this month of September, and my website hits aren’t coming.

But Judge Mark V Holmes comes to my rescue, and the legendary cavalry of my young days at the movies have nothing on Judge Mark V.  He’s designated fifteen (count ‘em, fifteen) orders, with docket numbers going back fourteen (count ‘em, fourteen) years. Cases tried, opinions issued, and the Rule 155 beancount is supposedly going on.

Here’s David B. Greenberg, et al., Docket No. 1143-05, filed 9/27/19. David and the als were part of AD Global. For the backstory, see my blogpost “Slog,” 5/31/18.

It seems Will is back from Portugal or wherever, and wants a stay to relitigate whether the FPAA for AD Global tolled the SOL for the individual partners.

Except.

Will and Dave lost that one in USCFC and Fed Cir affirmed. Besides, the criminal indictments severed the partnership items and dropped them to the partners as nonpartnership items. So mox nix whatever happens to AD Global the nonpartnership. Dear old TEFRA. Besides, Tax Court affirmed the legality of the conversions back in 2011.

Finally, “…[Will] argues a stay is necessary in these cases because he seeks to litigate (or, more precisely, relitigate) this statute-of-limitations issue in AD Global in the Court of Federal Claims. The Court of Federal Claims has stayed AD Global until final decisions are entered in these cases. On September 13, 2019, the Court of Federal Claims refused to lift that stay. Order dated Sept. 13, 2019, AD Global, 67 Fed. Cl. 657 (2005), aff’d, 481 F.3d 1351 (Fed. Cir. 2007) (No. 4-336T). Were we to grant this motion, cases in both courts would be suspended and no progress in bringing this whole litigation to a close would ever occur.

“This we will not do.” Order, at p. 3.

C’mon, Judge, no yellow card? If this move doesn’t merit a Section 6673 chop, what does? More to the point, Will’s motion is made in all fifteen (count ‘em, fifteen) cases. Even without taking off my shoes and socks, I figure fifteen times $25K is $375K, a World-record delay-of-the-game penalty.

And this is delay-of-the-game on steroids.

Carolyn J. Cole, Docket No. 14526-19, filed 9/26/19, is a self-represented petitioner who is also a lawyer. This reminds me of the old paradox of the barber who shaves everyone in town, except those who shave themselves; the question goes “then who shaves the barber?”

Carolyn J. Cole, Esq., does seem to have resolved the issue of the SNOD, which IRS bestowed upon her.  So IRS moves to dismiss her petition as untimely.

Except the SNOD wasn’t the issue. Ch J Maurice B (“Mighty Mo”) Foley explains. Carolyn J. Cole, Esq., wanted interest abated.

“Pursuant to I.R.C. section 6404(h) the Tax Court shall have jurisdiction over an interest abatement action brought by a taxpayer who meets the net worth requirement of section 7430(c)(4)(A)(ii) to determine whether the Secretary’s failure to abate interest under section 6404 was an abuse of discretion, and may order an abatement if such action is brought at any time (1) after the earlier of(a) the date of mailing of the Secretary’s final determination not to abate interest, or (b) the date which is 180 days after the date of filing with the Secretary of a claim for abatement of interest under section 6404, but (2) not later than the date which is 180 days after the date of the Secretary’s mailing of the final determination not to abate interest. I.R.C. sec. 6404(h)(1) (A) and (B).” Order, at p. 1.

So let IRS’ counsel check the record to see if either IRS rejected, or 180 days went by since Carolyn J. Cole, Esq., requested, abatement.

Apparently Ch J Mighty Mo’s directions to IRS to make jurisdictional motions on day 91 after anything hits their desks has taken effect.

Too great an effect.