Innocent spousery falls to the lot of STJ Lewis (“Honor That Name”) Carluzzo, as he enwraps himself in the mantle of a judge of even greater renown, in Elaine S. Thomas, Petitioner and Robert Roy Thomas, Intervenor, Docket No. 5680-18S, filed 4/18/19.

This off-the-bench designated hitter is about something less than $5K. STJ Lew questions the stipulated attribution of all to Rob Roy, but apparently is convinced by the record.

STJ Lew loves IRS counsel’s pretrial memo, which “…accurately and thoroughly (1) sets forth the background of this case; (2) describes the procedures respondent follows in such matters; and (3) lists the factors considered by respondent in responding to a taxpayer’s request for section 6015 relief. The pretrial memorandum also correctly notes that the Court, in general, considers the same set of factors respondent considers, although we are not limited to those factors or bound by respondent’s conclusions with respect to each factor.” Transcript, at p. 5.

It’s so good STJ Lew doesn’t bother to quote it. What a shame we all can’t read it, unless we surry on down to the stone soul picnic at 400 Second Street, NW; wouldn’t it be loverly if we could peruse each page at our leisure and at a dime a throw on PACER or equivalent?

STJ Lew cavils with only a couple points (hi, Judge Holmes, best holiday wishes to you and the whole crowd at The Glass House).

Elaine testifies credibly she didn’t know that Rob Roy was going to stiff the Federales, despite IRS and Rob Roy claiming she did know. Rob Roy was paying timely on a IA covering other years at that point, so she reasonably thought he’d throw this one in as well.

“We are more persuaded by the specific conduct pointed out by petitioner than we are by the general description of her and intervenor’s financial condition at the relevant time. We consider this factor neutral, rather than weighing against relief, as respondent scored it.

“On the other hand, because in the marital separation agreement, petitioner agreed to pay half of the…liability, we weigh the legal obligation factor against granting relief, even though respondent scored the factor as neutral.” Transcript, at pp. 6-7.

You can see STJ Lew reaching for that mantle, and the scourge of whips attributed by his successor to the famous Judge above-cited.

“We are particularly influenced by petitioner’s agreement to pay half of the [year at issue] liability. We are also influenced by the decision made by petitioner and intervenor to pay certain expenses rather than their [year at issue] income tax liability. Although the record shows their financial situation was less than comfortable, the record also shows that they had the resources to pay the liability but chose to save or allocate funds for other Purposes [sic]. Lastly, we are influenced by the fact that the unpaid [year at issue] liability is mostly, if not entirely attributable to intervenor. Giving effect to the martial settlement agreement, we see no reason why petitioner should continue to be liable for his share, nor do we see any reason why, or consider it inequitable to continue to hold her liable for hers.” Transcript, at pp. 7-8.

The USDCJ spoke for most of humanity when he said “I don’t know what effect that has on the Internal Revenue Service with all your penalties and interests [sic] and whatever, it seems to me that if you hope to get anything out of this guy, freezing his number at $507,995 is a pretty good idea.  And that is what’s ordered by the court.” Randy Alan Carpenter, 152 T. C. 12, filed 4/18/19.

Randy Alan went down for two years’ worth of fraudulent returns, thus the $500K-plus restitution. But the USDCJ also ordered $100-per-month payments, although at the same time he said the entire amount was immediately payable.

Randy Alan claims he’s broke, but when IRS filed NFTL and NITL, Randy goes to Appeals, withdraws his request for collection alternatives, and says IRS needs a further order from USDCWDNC before they can grab whatever little he has.

No way, says Judge Mary Ann (“S.E.C. = She Eschews Cognomens”) Cohen.

“With the enactment of section 6201(a)(4) Congress expanded the Secretary’s collection authority in relation to criminal restitution ordered after August 16, 2010.  See Firearms Excise Tax Improvement Act of 2010 (FETIA), Pub. L. No. 111-237, sec. 3, 124 Stat. at 2497.  This provision directs that ‘[t]he Secretary shall assess and collect the amount of restitution under an order pursuant to section 3556 of title 18, United States Code, for failure to pay any tax imposed under this title in the same manner as if such amount were such tax.’” 152 T. C. 12, at p. 15. Moreover, IRS isn’t bound by SOL while any appeals from the criminal conviction are taken and decided. See Section 6501(c)(11).

As if. Hans Vaihinger, thou should’st be living at this hour.

There’s a whole megillah (please pardon arcane technical term) about whether a USDCJ’s oral comments about payment schedules overrides that same jurist’s statement that restitution is “immediately due.” When you’ve read the opinion and you’re thoroughly confused, the best I can tell you is “it depends.” In Randy Alan’s case, though he stuck to the schedule ($100-per-month), it avails him not. The USDCJ used the magic language in the magic way.

Neither Section 6230(b) nor Section 6330(b) precluded Randy Alan from offering a collection alternative, even in a restitution case, but he was behind four (count ‘em, four) years’ worth of tax returns when he petitioned, so that route didn’t look too auspicious.

IRS did abate interest and penalties. For the skinny on this, see my blogpost “IRS Gets Zip,” 10/3/17.

Takeaway- Criminal defense Bar, please stay safe out there. If you want a schedule, make sure the USDCJ says “schedule payment and not, repeat not, immediately due.”

Much fanfare accompanied the promulgation of the so-called “Taxpayer Bill of Rights.” Judge James S (“Big Jim”) Halpern has compressed this title into TBOR, and I shall do likewise.

Maria Ivon Moya, 152 T. C. 11, filed 4/17/19, claims IRS trampled on these rights by not giving her an audit nearer her home, sent her misleading correspondence, and inconsistent information. But Maria Ivon never challenged IRS’ determinations blowing off her Sched C losses and raising her taxable Social Security payments. And although she timely petitioned the SNOD IRS sent her, she never assigned error to what IRS did. And Judge Big Jim catechized Maria Ivon both telephonically and personally to raise specific issues with IRS’ numbers. She didn’t.

In her post-trial brief, Maria Ivon complained about IRS’ counsel and the Taxpayer Advocate not helping her, but Judge Big Jim says even if he considered that, it wouldn’t change the result.

Maria Ivon argues the SNOD was invalid because IRS violated her rights. Well, apparently Mark Zuckerberg tried a similar move based on TBOR back in 2017 in USDCNDCA; see Facebook and Subsidiaries v. Com’r, 17-cv-06490-LB, 2018. Mark fared no better.

Greenberg’s Express is the barrier. In a deficiency case, you get a de novo review. Therefore, all that is past isn’t even prologue. For sixty bucks and a certified letter, you get a new shuffle-and-deal, whatever IRS did or didn’t do.

When TBOR first blipped the radar, its biggest proponent, NTA Nina E. (“The Big O”) Olsen, made it crystal clear that no new rights were created thereby. All TBOR did was put in one place, and in simple terms, what was scattered throughout the IRC.

Legislative attempts to require IRS’ high command to “teach them diligently” to all IRS personnel, and to “talk of them when thou sittest in thine house, and when thou walkest by the way, and when thou liest down, and when thou risest up,” as a much more Exalted Authority put it in connection with ten much more significant pronouncements, never got enacted.

Simple, right? Raise your objections to the deficiency in your petition, or lose them; forget the IRS’ missteps. Only the most blatant Constitutional violations will avail, and this isn’t such a case.

One thing puzzles me: IRS ”…alleges that petitioner will have the opportunity to resolve this case with the IRS Office of Appeals.” 152 T. C. 11, at p. 6. How? Maria Ivon had her chance in this proceeding, and never addressed the deficiencies themselves. No way do you get a second chance at liability on a CDP if you got the deficiency, petitioned it, and lost in Tax Court. Maybe IRS meant CNC, IA, OIC as to collection, but that was certainly a misleading statement.

Howbeit, this case was hardly well-litigated, and I’m sorry we didn’t get a better fact pattern and record in a precedent-setting case.

“Neither party has presented us with a rigorous argument either way as to whether the IRS TBOR accorded petitioner rights the violation of which would give us reason to ignore the principle articulated in Greenberg’s Express and look behind the notice in order to remediate any violation.  Petitioner has made no argument at all.  Respondent’s argument that rights found in the IRS TBOR are not constitutional rights is perfunctory.  Nevertheless, on our own examination of the question, we conclude that, even if we were to credit petitioner’s claims that, in examining her returns, respondent violated her rights to be informed, to challenge the IRS position and be heard, and to a fair and just tax system (all rights found in the IRS TBOR) and, also, that he failed to afford her an interview near her home in California before he issued the notice, we would neither invalidate the notice, relieve petitioner of any portion of the burden of proof, nor take any other action to remediate those violations or failure.  The simple reasons are that (1) the IRS TBOR did not add to petitioner’s rights and (2) even if everything she says is true, respondent’s missteps that petitioner complains of would not in this de novo proceeding cause us to either lift or lighten her burden of proving error in respondent’s determinations of deficiencies in her tax.” 152 T. C. 11, at pp. 16-17.

So if you get a de novo hearing before an impartial tribunal (which Tax Court is), unless IRS used unConstitutionally obtained evidence, IRS can do whatever it wanted before.

The Taxpayer Bill of Rights is the Taxpayer Bill of Goods.

Oh, those electrons! Sneaky little chappies, they can undo and confound without regard to age and status.

Here’s the sad tale of Wm W Smith, Esq., name partner in the firm of Smith & Alspaugh, PC, Docket No. 4315-19L, filed 4/16/19.

Looks like Wm W, representing his eponymous PC, filed what Ch J Maurice B (“Mighty Mo”) Foley recharacterizes.

“…petitioner’s counsel William W. Smith filed a Motion For Leave To File Motion for Permission To File with Paper as well as Electronically, which is in fact a motion to be exempt from E-filing.” Order, at p. 1.

Well, we remember the Texas Technophobes, headed by Terri M. Morgeson, Esq. You don’t? Then see my blogpost “The Best Little Low-Income Tax Clinic in Texas,” 7/18/14. And Old Bill Wise, star of my blogpost “(Old) Technophobes, Rejoice!” 12/18/13.

Wm W’s story is that he’s 77 years old and he isn’t proficient at electronic filing.

Well, I’m not all that much younger than Wm W, but I can generally figure out how to scan and get a PDF thereof into most e-filing systems. However, I readily agree not everyone can assimilate the Body Electronic.

But Wm W sets off his own electronic petard.

“He further states that he will attempt to electronically file, and in fact, electronically filed his motion to be exempt from electronically filing.” Order, at p. 1.

But instead of giving Wm W a “well done” for having mastered the new (to him) electronic frontier, Ch J Mighty Mo gives Wm W the toss.

“In pertinent part, Rule 26(b), Tax Court Rules of Practice and Procedure, generally provides that electronic filing is required for all papers filed by parties represented by counsel in open cases. Mandatory electronic filing does not apply to petitions and other papers that are not eligible for electronic filing. Rule 26(b)(1), Tax Court Rules of Practice and Procedure. However, Rule 26(b)(3), Tax Court Rules of Practice and Procedure, provides that any counsel in a case upon motion filed in paper form and for good cause shown may be granted an exception from the electronic filing requirement.” Order, at p. 1. (Emphasis by the Court).

Wm W, you filed electronically, so you are forever electronicuted.

Sorry, George Jones and Speedy, but relief from (getting out of) a signed stipulation in US Tax Court is not “just a swallow away.”

Just ask Edward Roberson & Connie Roberson, Docket No. 27486-15, filed 4/16/19. And Judge Buch will definitely roger that transmission.

Ed & Connie were fighting with IRS over Ed’s Sched C. They were on for trial last November. They answered the calendar call and were awaiting trial, when they stiped out. Fellow practitioners tell me that maybe 70% of Tax Court cases on the calendar either get bounced on default or are stiped out.

IRS promptly sent the decision documents to Ed & Connie in November. Judge Buch gave them to January 7 this year to sign, but Shutdown.

When IRS went back to work, Ed & Connie said they weren’t signing, because the Sched C income was lower and deductible expenses higher.

IRS moved to enter decision (what we State courtiers call “judgment”) based on the stip; Ed & Connie counter with their revised numbers.

Judge Buch: “We may modify or set aside a stipulation that is clearly contrary to the facts, but we do not set aside a stipulation that is consistent with the record simply because one party claims the stipulation is erroneous. We may grant relief if a party asserts contractual defenses, but a unilateral mistake of fact in a binding, unambiguous stipulation is not a ground for relief.

“The Robersons did not present any contractual defenses. The Robersons raised the issue of this alleged error only after the parties entered into the stipulation. The Robersons’ unilateral mistake (assuming there was one) is not grounds to set aside a contract.” Order, at p. 2. (Citations omitted, but get them for your memo of law file).

The Robersons claim the stip was a “take it or leave it” proposition. But they knew from IRS’ amended answer four months before trial that Sched C numbers were on the table.

And finally, the real point: “Moreover, the Robersons were represented by their counsel who also had notice of the items in dispute. The parties thus freely and fairly signed the stipulation long after both parties were aware of what was at issue. We are reluctant to relieve a party from a stipulation when the party entered into the stipulation with full knowledge of the relevant facts.” Order, at pp. 3-4. (Citations omitted; see above parenthetical).

Of course, Ed & Connie could have gone to trial. They didn’t, so they’re stuck. Who stipulates, capitulates.

Always eager to help my colleagues, I refresh my reference to separate checks for attorneys appearing in Tax Court: there is no Entry of Appearance for law firms.

See my blogpost “Separate Checks,” 9/1/15.

Today we have an attorney, in the firm that represents the petitioners, trying to solve a problem expeditiously with a letter, and getting unceremoniously tossed by Ch J Maurice B (“Mighty Mo”) Foley.

See Gelacio R. Nepomuceno & Nancy G. Nepomuceno, Docket No. 4510-19, filed 4/16/19.

Unfortunately the only currently-filed Entry of Appearance names the senior managing attorney individually.

Perhaps the problem-solver should have enclosed her own Entry of Appearance with her letter.

Word to the Chief Clerk: There exist such things as law firms, with principals and associates all of whom are admitted to Tax Court. So there really needs to be a new form of Entry of Appearance, recognizing that law firms do exist, that various attorneys employed therein share files among themselves, and might occasionally ask a colleague to cover a routine matter while on trial or on vacation. Maybe we don’t need the covering attorney to file an Entry of Appearance for essentially a one-time appearance. Perhaps a one-size-fits-all law firm Entry of Appearance, listing all admittees in one place, might save time and paper (or electrons).

Meantime, to my law firm colleagues, and any solos using per diems, make sure everybody has an Entry of Appearance (Form 7) to send in (in duplicate) any time they need to step in for the colleague or solo.

Siemer Milling Company, 2019 T. C. Memo. 39, filed 4/15/19, heretofore featured in this my blog for its Gargantuan Rule 91(f) proposed stips. But Judge Buch, tiring of such tactics, told Siemer to go try the case.

See my blogpost “Don’t Manipulate, Stipulate,” 12/4/17.

Siemer did, and their Section 41 research expense deductions crater on non-application of “principles of the physical or biological sciences, engineering, or computer science,” because Siemer didn’t show they used any, and on Siemer’s failure to show they formulated or tested hypotheses, or engaged in modeling, simulation, or systematic trial and error. In short, tinkering isn’t research.

IRS argue that Siemer didn’t have business uncertainty in more than one year, but that doesn’t fly. One can be uncertain for years while experimenting.

And Siemer’s lead researcher (the only one who testified) had no engineering or science degree. So what, says Judge Buch. The law doesn’t require an experimenter to have such degrees. And IRS could have called any of Siemer’s employees, so no negative inference that Siemer didn’t call them.

But ultimately all six (count ‘em, six) projects for which Siemer claimed deductions were elaborated by Siemer’s trusty accountants, who had prepared Siemer’s statement and returns for decades. So no chops, but a salutary warning: stretching a good idea too far can be dangerous to your tax health.

The old Cockney personification of the affidavit gives me the title for today’s practice tip from that Obliging Jurist, Judge David Gustafson.

Thanks, Judge, it was a slow news day at calendar call this morning on our Minor Outlying Island off the North American Coast. Though Office of Chief Counsel personnel were friendly, everything was off the record. And The Jersey Boys, ably assisted by the NY County Lawyers’ volunteers, cleaned up the calendar, so ex-Ch J Michael B (“Iron Mike”) Thornton could engage litigants with his Southern courtesy unruffled.

But here’s the tip. Jonathan C. Bloch, Docket No. 9028-18, filed 4/15/19, stiped to facts and went in on a Rule 122 all-in-the-papers, making a joint motion with IRS.

The motion papers say no trial necessary, and the stip says it all.

Except the stip says “either party may introduce other and further evidence not inconsistent with the facts herein stipulated.” Order, at p. 1.

So when JC puts in his opening brief, he attached three (count ‘em, three) affidavits nowhere to be found in the motion paper or the stip.

So Judge Gustafson, like a Nürnberg Meistersinger, gives JC a “Mein! Was ist das?” Only he does it thus.

“Looking solely at the joint motion, one would suppose that Mr. Bloch was not entitled to submit affidavits, since the motion seems to state that the agreed-upon record of the case consists of the pleadings and the stipulation. On the other hand, looking solely at the stipulation, one would suppose that Mr. Bloch might have been entitled to submit ‘other and further evidence’. Order, at pp. 1-2.

Looks like IRS’ boilerplate was put in the stip to allow Boss Hossery if previously missed, or open the door to contentions not yet contended (see my blogpost “The Discovery Waltz,” 4/9/19, where Judge Gustafson cracked down on that gambit). But like most boilerplate, this one might leak if subjected to unusual strain.

“We do not know what the parties’ actual intention was as to the submission of supporting affidavits, nor whether they shared a common understanding. Affidavits are, by their nature, hearsay, and they are therefore generally not admissible into evidence. See Fed. R. Evid. 802. However, an affidavit may be received into evidence if the other party does not object. And parties submitting a case under Rule 122 could include in their stipulation an affidavit that they agree is to be received in lieu of live testimony. (Sometimes the parties stipulate that, if called as a witness, the affiant would testify as indicated in his affidavit.) The stipulation may state that the other party does not stipulate to the truth of the content of the affidavit but agrees that the affiant would so testify if called. Where an affidavit is submitted in such a manner under Rule 122, it does become evidence in the case; but Rule 122(b) warns the parties that submitting the case under that rule does not alter the burden of proof. Thus, a party deciding whether to agree to submit his case under Rule 122 and to rely on affidavits (rather than obtaining live testimony at a trial) should consider that the written affidavit–not presented by in-person testimony, and not subject to cross-examination–may simply not be persuasive and may therefore not succeed in carrying the party’s burden of proof.” Order, at p. 2.

Remember, “hearsay” is when the party supposedly testifying isn’t in the courtroom, so can’t be cross-examined, and can’t be observed by the trier of fact (judge or jury). Judges don’t like hearsay. If cross-examination is “the greatest legal engine ever invented for the discovery of truth,” then observing a witness’ body language and tone of voice is a close second.

So call Judge Gustafson no later than Friday, to set up a phoneathon to sort out exactly what all this means.

Practitioner, watch those affidavits. They’re great for sculpting the responses of a discursive witness, but might could be a lot less convincing than said discursive witness on the stand.

Tohubohu Isn’t Even Close

The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, has a doozy to end the week in EZ Lube, LLC, EZL-1 Investments, Inc., A Partner Other Than The Tax Matters Partner, Docket No. 18021-13, filed 4/12/19.

EZ crashed years ago, but Goldman Sachs bailed them out. How they got bailed is the fight: was it termination of one partnership with deemed sale of its assets, per Section 708(b)(1)(B), and deemed capital gain; or did the partnership go on, with COD and concomitant ordinary income as to the outgoing partners? The outgoers want the first, the incomers the second.

IRS went with the incomers, and issued a FPAA, which the outgoers petitioned.

But then came Tax Court’s latest bargain baby, the remand.

“The Appeals officer who handled the case spoke on the phone with petitioner’s counsel and said she thought that the FPAA should be conceded — namely, that the original [outgoers’] returns were correct. She said that her manager concurred with her view, but that it was also necessary for her to consult with the Appeals National Office before any such concession could be embodied in a TEFRA settlement. The National Office disagreed with the Appeals officer, however, which meant the case did not settle in the usual way.” Order, at p. 2.

And the famous Susan L. Latham, then of the Department of the Treasury, Memorandum for Appeals Employees (Control No. AP-08-0713-03) (July 18, 2013), was going to set up a quasi-judicial approach at Appeals, the so-called AJAC, the Appeals Judicial Approach and Culture.

“Haha and hoho,” yell outgoers, “no settlement, the phonecall was a determination. Back to Tax Court for a ‘dission’.”

The outgoers claim Tax Court, that creature of statute, has jurisdiction.

Judge Holmes: “But where? Sections 6320(c)2 and 6330(d) give us jurisdiction to review Appeals Office’s determinations to proceed with enforced collection. Section 7429(b)(2)(B) gives us jurisdiction to review the Commissioner’s jeopardy levy or assessment in cases where he makes such an assessment after a taxpayer has petitioned for redetermination of a deficiency. Section 6404(h) gives us jurisdiction to review determinations not to abate interest. Section 7476(a) gives us jurisdiction to review determinations about the qualifications of ESOPs. Section 7428(a) gives us jurisdiction to review determinations to deny tax-exempt status. And section 7436(a) gives us jurisdiction to review determinations about an individual’s employment status.” Order, at p. 4.

Note to prospective candidates for Tax Court admission via the test: memorize this list. And practitioners, both attorneys and USTCPs, would do well to do likewise.

OK, say the outgoers, so use the Administrative Procedures Act default rules, and decide that way.

“What petitioner seeks is review under the default rules of the APA. Those default rules would mean that our scope of review would be limited to the administrative record compiled by the IRS, and our standard of review would be to look for an abuse of discretion. Both this scope and standard of review are different from what we use in TEFRA and deficiency cases. And that’s not all — the proper default venue for review of administrative-agency determinations that lack a special statutory review procedure are the federal district courts, under their general federal question jurisdiction.” Order, at p. 5 (Citations omitted).

Maybe the outgoers are arguing that there is a new subset of TEFRA, a sort of ancillary or TEFRA-lite. Just what we need, another permutation of the dying dinosaur TEFRA (sarcasm alert).

But Judge Holmes doesn’t see that.

“The contents of a phone call might be a fact relevant to our decision, but it is irrelevant to our jurisdiction to decide. Here petitioner argues that the phone call itself is of jurisdictional importance. If it is correct — that some court somewhere has to have jurisdiction to review this phone-call ‘determination’ — that court is not Tax Court. If petitioner is wrong, then the phone-call determination isn’t reviewable and is just part of settlement negotiations that didn’t work out. Under either analysis, and in a case where our Court has jurisdiction under TEFRA, it must be ORDERED that petitioner’s motion for summary judgment is denied.” Order, at p. 6.

And by the end of next month, guys, tell poor Judge Holmes what you want to do with this mess.

Thanks, Judge Holmes, for a designated hitter that really hits the spot on a Friday. And a Taishoff “Good Try, First Class” to Steven Ray Mather, Esq., another L. A. lawyer.

No, this is not a plot suggestion for a defunct television series. This is real-life L. A. Law, featuring a real-life L. A. lawyer (whom I don’t know) with a client who has to be in the top-fuel wag, wit and wiseacre category.

And who better to decant for us this ya-can’t-make-this-stuff-up tale than STJ Lewis (“A Name to Inspire Legends”) Carluzzo?

Here’s an off-the-bencher designated hitter, Mohamed A. Hadid, Docket No. 14213-18L, filed 4/11/19.

Mo was in the hole four-for-three. That means $4 million in tax liabilities for three (count ‘em, three) tax years. Mo doesn’t dispute this. IRS wants to levy, and Appeals says “go right ahead.” Mo and his trusty L. A. attorney, whom I’ll call MG, petition.

There’s a brief joust over the administrative record, as they’re in record-rule LaLa Land. STJ Lew says “mox nix, let it all in.”

Mo wants an IA.

“As a collection alternative to the proposed levy, Petitioner requested an installment agreement and offered to pay $30,000 per month towards the underlying liabilities. In support of his request for the installment agreement, petitioner provided a financial statement showing that he had $5,000 of monthly income and more than $200,000 of monthly expenses. Petitioner’s offer was conditioned upon respondent’s agreement that a Notice of Federal Tax Lien (NFTL) would not be filed with respect to the underlying liabilities.” Transcript, at p. 5.

Awesome.

“At trial petitioner’s attorney acknowledged the obvious mathematical implications,  but suggested that the money would come from somewhere.” Transcript, at pp. 5-6.

I was about to suggest Shangri-La, when I recalled the death yesterday at age 103 of Col. Dick Cole, the last living Doolittle raider. President Roosevelt said the raiders came from Shangri-La.

I award MG a Taishoff “Good Try, Third Class.”

And we can stop here.