Judge Buch gets it mostly right in this off-the-bencher, Gretchen Sue Humiston, 27125-16S, filed 8/18/18. But he gets the last part wrong.

When Gretchen Sue split from unnamed ex-husband, their divorce lawyers got it entirely right, both with the Matrimonial Settlement Agreement and the subsequent modification thereof. Parties no longer living together, decree of divorce, MSA explicitly states cash payments made for a fixed term of years not contingent on any child, MSA explicitly states deductible by husband and income to wife, and payment terminates with death of either. So it’s truly alimony.

Except. Ex-husband didn’t pay, so modification agreement. But payments as modified thereunder still terminate with death. So still alimony.

Except. Ex-husband had to pay on life insurance policy on Gretchen Sue, with their kids as beneficiaries. Gretchen Sue says that substitutes for ex-husband’s payments if she dies, thus payment doesn’t terminate with her death. So Gretchen Sue doesn’t pick up the payments she got from ex. She claims it’s a property settlement, not alimony.

IRS does pick it up, and hits Gretchen Sue with a SNOD.

Judge Buch: “Ms. Humiston’s arguments as to why the payments should be treated as property settlement are unavailing. She argues that the payments should not be considered as terminating after her death because the life insurance policy maintained on her is a substitute for those continuing payments. But that life insurance policy does not require any payments by Mr. Humíston after Ms. Humiston’s death.” Order, transcript, at p. 8.

Gretchen Sue is peeved that ex-husband has shortchanged her, so she shouldn’t have to pay tax on what she got.

“She notes her perceived irony at the fact that the shortfall in Mr. Humiston’s regular maintenance payments is roughly equal to tax liability differential that arises from including (for her) and deducting (for him) the regular maintenance payments.” Order, transcript, at p. 8.

OK, so Judge Buch got it right. The deal, as amended both in writing and by performance, is alimony; Section 71(b)(1) is satisfied.

But here’s where he gets it wrong.

“But Ms. Humiston does not get to make herself whole by shortchanging the Commissioner.” Order, transcript at p. 8.

No, sir, not the Commissioner…shortchanging you and me and every taxpayer who pays what they properly owe. The Commissioner is just an agent, collecting revenue to run the government. If someone pays less, we pay more.

400 Second Street, NW, is posted: off limits, no fishing. Judge Albert G (“Scholar Al”) Lauber has nailed up the sign in Trust u/w/o BH and MW Namm f/b/o Andrew I. Namm, Andrew I. Namm and James Doran, Trustees,  Transferee, et al., Docket No. 8485-17, filed 7/18/18. There are nine (count ‘em, nine) docket numbers involved, and a trip down Memory Lane, as this is a Section 6901 romp through an exploded Son-of-Boss, another Diversified Group, Inc.- James (“Little Jim”) Haber production.

Y’all remember Little Jim, the famous immunologist? No? He’s shown up about a dozen times in this my blog over the last six years. I won’t chronicle them all, for want of time and space, but google.com might find some of them.

Howbeit, Little Jim is out of the picture, but the Namms want to escape penalties by claiming reliance on the white-slippered corps de ballet that Little Jim assembled to window-dress his mix-and-match.

IRS claims that they handed over everything they had that bears upon the Namms’ cases.

The Namms, nowise satiated with IRS’ averments, want “…a vast universe of information that may be contained in IRS files as a result of possible prior or ongoing IRS examinations or investigations of the third parties….” Order, at p. 2.

Had IRS ever examined any of the ballerinas in connection with their dealings with Little Jim & Co.? If IRS has, hand over the entire file. That founders on Section 6103; information produced on audit vel non (that’s “if any,” as classical scholars like Judge Lauber say) is protected, except for the transactional relationship in Section 6103(h)(4)(c). But the Namms “…have failed to show that such information ‘directly relates to a transactional relationship’ between the third parties and them.” Order, at p. 4.

The Namms try an “it might be, it could be” that the sought-after material might show IRS couldn’t discern what was going on, and therefore the Namms didn’t have constructive knowledge of Little Jim’s skullduggery. Too big a stretch, says Judge Scholar Al. “We find this chain of hypotheses and inferences too thin a reed on which to hang a discovery request of this magnitude. Indeed, the ultimate target of petitioners’ request would seem to be the opinions and observations of the IRS officers who may have participated in whatever investigations occurred. Wholly apart from section 6103, those opinions and observations would appear to be immune from discovery under the deliberative process privilege.” Order, at p. 4. Greenberg’s Express, anyone? Whatever IRS thought, the issue is what they did.

“Finally, even if the information petitioners seek would otherwise be discoverable, we would deny their motion to compel because the scope of their request is disproportionate to the potential utility of the information. We have discretion to limit the scope of discovery if we determine that: (1) ‘[t]he discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive’; or (2) ‘the discovery is unduly burdensome or expensive, taking into account the needs of the case, the amount in controversy, limitations on the parties’ resources, and the importance of the issues at stake in the litigation.’ Tax Court Rule 70(c)(1)(A) and (C).

“Petitioners have requested 18 years of IRS examination material possibly involving as many as six separate taxpayers, including two tax-shelter promoters and one of the largest accounting firms in the world. Most if not all of this information will have no bearing on the transactions that are actually at issue in these cases. Through informal discovery, respondent has already provided petitioners with all documents it has obtained from the third parties relating to the transactions at issue in these cases.” Order, at p. 5.

Nothing stops the Namms from asking the six third parties for info. They apparently haven’t.

Judge Scholar Al puts it simply: “Petitioners’ discovery request strikes us as a classic ‘fishing expedition.’” Order, at p. 3.

I wish Judge Lauber had designated this order. It’s really too good to relegate it to the mine run of orders.

And I wish the order had been better paginated. The pagination on the website is unworkable, so I used my own.

Ex-Ch J Michael B. (“Iron Mike”) Thornton is not so direct with petitioners’ counsel in John R. Fletcher & Jo Ann Fletcher, Docket No. 13040-15, filed 7/17/18, but he’s sending a message all counsel should heed.

John’s and Jo’s counsel, whom I’ll call JD, apparently has health problems. His secretary failed to calendar a due date for a show-and-tell memo: what’s your facts and law, any expert witnesses, and status of prep. Then ex-Ch J Iron Mike has a phoneathon, wherein JD says his health may prevent trial when scheduled (the case had been continued five, count ‘em, five, times) and his health prevents him from preparing.

“Finally, [JD] stated that petitioners, who were divorced at the time of filing the petition, are ‘split’ on whether he may continue to represent them. He explained that he has advised petitioners regarding potential conflicts in representing them in this case but does not have their consent in writing. [JD] also provided a noncommital response as to whether either petitioner plans to seek spousal relief pursuant to section 6015.” Order, at p. 2 (Footnote omitted).

Ex-Ch J Iron Mike cites Rule 24 and the ABA Model Rules extensively, with a reminder to JD that the Court can toss counsel for unresolved conflicts.

And Rule 1.16(a)(2) requires withdrawal if an attorney is unable to represent clients because of physical or mental health issues.

But ultimately there is a further incentive to bail, and ex-Ch J Iron Mike is nowise loath to tell you all about it.

“…attention is called to section 6673(a)(2) which provides that whenever it appears to the Court that any attorney admitted to practice before the Tax Court has multiplied the proceedings in any case unreasonably and vexatiously, the Tax Court may require that such attorney pay personally the excess in costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” Order, at p. 4.

So, JD, show cause in writing why you should not be tossed. And your clients are getting a free copy of this order.

Or, Never Time to Do It Right

Word-processing software is the boon and bane of our existence. I was talking to a colleague over coffee yesterday, and we were discussing the demise of the legal secretary, now that we all have computers and files of documents from which to cut, paste, extrapolate, interpolate and obfuscate on every topic that may possibly swim into our working-day ken.

So speed beats care, and there’s never time enough to do it right, but always time to do it over. Except even then we are the prisoners of our electrons.

Today Judge Cohen shows no patience with an IRS attorney who grinds out the pretrial memo and opening brief, and then changes his story on reply brief, in Darrell Archer, 2018 T. C. Memo. 111, filed 7/16/18.

I can sympathize with the IRS attorney. What Darrell lacks in substantiation he doesn’t make up for in testimony, so most of his deductions go the way of all clichés.

Darrell, like so many of the unsubstantiated, owns and operates rental real estate. I expect the IRS attorney thought this was a throwaway, and went for the first boilerplate paragraphs he could find.

It proved an impediment.

“Respondent argues in his pretrial memorandum and in his opening brief that petitioner is not entitled to deduct the rental losses … to the extent they exceed $25,000 because of the passive activity limitations of section 469. See sec. 469(i). Nothing in the record, however, suggests that the loss deductions claimed exceeded $25,000, or that any overall limitation was the reason for disallowance. We see no reason, therefore, to discuss further the complex provisions of section 469. We interpret respondent’s arguments as a concession as to any substantiated expenses totaling less than $25,000.” 2018 T. C. Memo.111, at pp. 12-13.

Might have done better to forego the passive losses and stayed with the non-substantiation. But the attempted goal-line save is even worse.

“In his reply brief respondent argues that petitioner failed to substantiate his rental losses and seeks to impose additional obligations on petitioner not addressed in respondent’s pretrial memorandum, at trial, or on opening brief. We disregard those belated contentions.” 2018 T. C. Memo. 111, at p. 13.

So Judge Cohen hands Darrell $5K in real estate losses, based on Cohan and Darrell’s testimony that otherwise flunks the other tests.

“His testimony and his brief emphasize his subjective belief that ‘every deduction that I made I believed to be an absolute legitimate deduction. A deduction that I deserved and should take’. Such testimony does not carry his burden.” 2018 T. C. Memo. 111, at p. 9.

Boilerplate is indeed a hazardous substance.

Maybe that hallowed 1974 classic, Greenberg’s Express, 62 T. C. 324, isn’t so dead as maybe some of us thought. When I wrote my blogpost “Play Nice at the Graev“ 7/10/18, I envisioned interrogatories, depositions, document demands, and trials, flowing from ex-Ch J L Paige (“Iron Fist”) Marvel’s expansive order therein recited.

No less an authority than the Lead of The Jersey Boys confided to me the other day that Greenberg’s Express has been derailed, that Judge Tannenwald’s famous diktat that “(A)s a general rule, this Court will not look behind a deficiency notice to examine the evidence used or the propriety of respondent’s motives or of the administrative policy or procedure involved in making his determinations,” 62 T.C. 324, at p. 327, is dead-letter law.

Formerly, only when the very fabric of the Constitution was involved would Tax Court lift the shroud that envelops the IRS’ internal machinery.

But Graev III, while broaching no new law (the statute is twenty years old this year), opened the floodgates in many cases where the Section 6751(b) Boss Hoss sign-off wasn’t even honored in the breach, much less the observance.

Who better to put Greenberg’s Express back on the tracks and cause that venerable locomotive to make the merest whistlestop at the Graev than The Great Concurrer/Dissenter, Master Silt Stirrer and Old China Hand, Judge Mark V. Holmes?

Here’s a designated hitter to send us off to the weekend despite the Friday the 13th jinx, Scott A. Householder & Debra A. Householder, et al., Docket No. 19150-10, filed 7/13/18.

Scott & Deb had their day in court, and even cross-examined IRS’ declarant who now seeks to wild-card in the Boss Hoss sign-off, but nobody mentioned Boss Hoss on the trial. Scott & Deb yell “too late and prejudice, besides it’s all hearsay.”

Now the Boss Hoss sign-off is riddled with hearsay. But IRS is crafty, and relies on our old friend res gestae. I remember Prof. Grey T., on the Hill Far Above, so long ago, proclaiming “It’s all part of the reece jest-eye.”

For those of my readers who didn’t attend a high-priced law school, the res gestae is an exclamation or document introduced into evidence for the fact that it exists or was said, not for the truth thereof. So, like John Ciardi’s apostrophe to a poem, the statement need not mean but be.

True, the IRS is extremely tardy and slow off the mark.

“But we do think the Commissioner might have had less reason to anticipate the importance of § 6751 in this case than in many other cases. Although Graev III didn’t create new law, it is true that it and Chai are the first cases to clarify that § 6751(b) and § 7491(c) combine to place the burden of production on the Commissioner to show that he complied with § 6751(b) in cases where he wants a penalty. And unlike other cases where Chai ghouls have appeared, § 6751 never came up here in pretrial motions or discovery, and the Ninth Circuit has found that reopening the record may be justified in such a case. There wasn’t a change in law here — in the strictest sense of the phrase -but we also think it is possible that Graev III‘s consequences might have surprised the Commissioner in this case where § 6751 had not been talked about at all.” Order, at p. 6. (Citations omitted).

And Scott & Deb’s beef about prejudice and the need to sweat IRS’ declarant doesn’t get it, because said declarant testified enough on the trial back in 2014 to show the Boss Hoss did sign off.

As has been said before, the mere fact that the document exists is enough. See my blogpost “Robosigner? – Part Deux,” 4/5/18. All my piety and wit, and all my tears cannot wash out a word of it, as a much finer writer than I put it.

Edited to add: I’m told the line about a poem should not mean but be is not by John Ciardi, but by Archibald MacLeish. Sorry, Archie.

Martin W. Washburn, Jr., 2018 T. C. Memo. 110, filed 7/12/18, owned a C Corp which was majority member of an LLC. Martin was “corporate secretary” of the LLC, although STJ Diana L. (“Sidewalks of New York”) Leyden doesn’t know how the LLC was taxed (2018 T. C. Memo. 110, at p. 3, footnote 3).

Howbeit, Martin “…and four other individuals (hereinafter sometimes collectively referred to as codefendants) participated in a scheme to defraud the Overseas Private Investment Corporation (OPIC) to obtain a loan of about $9.4 million for [LLC].” 2018 T. C. Memo. 110, at p. 3. OPIC was a US government agency whose aim was to encourage foreign investment by US small business companies.

Martin made the application as sec’y of the LLC, claiming his C Corp was the “sponsor” that is, the US investor, and was putting up a big chunk of cash, with OPIC throwing in the rest of our money (that is, our tax dollars at work).

Martin and the co’s worked a put-and-take with the cash that the C Corp supposedly ponied up. Their offshore enterprise first built a grain-drying facility in Vahenurme, Estonia, bought a bakery in Valga, Estonia (thus the title of this little tale), and later built a mill in Viljandi, Estonia.

Well, the Estonia deal turned out to be half-baked (sorry, guys).

“…disputes arose over the management and control of the milling and bakery operation.  It was during the course of these disputes that OPIC discovered that GSP had misrepresented certain facts in its loan application.  Contrary to the statements in the loan application, the investment contributions to [LLC] by [C Corp] and one other [LLC] owner [member?] were in substance a disguised loan from one of the codefendants.  Petitioner and his codefendants withheld bank statements from OPIC that showed that the investment contributions by [C Corp] and one other [LLC] owner [member?] were immediately distributed to the codefendant who made the loan.” 2018 T. C. Memo. 110, at p. 4.

In other words, the LLC members cashed out and left us (the US taxpayers) holding the cliché. They also engaged in buying equipment from themselves at inflated prices, and lied to OPIC.

Martin and the cos went down in some unstated-USDC, with $400K in restitution being ordered, as well as jail time.

The fight is about whether Martin gets a tax deduction for the $400K. Martin never got a SNOD, because he first claimed the $400K as withholding, and the CP23 IRS issued Martin taking that away doesn’t rate a SNOD; see Section 6213(b)(1).

Martin changed course, abandoning his claims that the $400K was estimated tax payments or a claim-of-right credit per Section 1341. Now he claims Section 162 business expense or Section 165(c)(2) transaction entered into for profit.

STJ Di looks at the stip the parties entered into. Remember, Tax Court judges love stips; who wants to sit through a lot of blathering witnesses and bombastic lawyers, when the facts are cut and dried?

The sacred Branerton case is exhumed, and veneration paid to it and its kindred.

“The stipulation process is considered ‘the bedrock of Tax Court practice’ and acts ‘as an aid to the more expeditious trial of cases’.  Branerton Corp. v. Commissioner, 61 T.C. 691, 692 (1974).  Stipulations narrow controversies to their essential issues in dispute. Generally, a stipulation is binding on the parties, and the Court is bound to enforce it.  Rule 91(e) provides an exception by permitting relief from the binding effect of a stipulation where justice so requires.  The Court generally enforces stipulations unless ‘manifest injustice’ would result. Absent manifest injustice, the Court ‘will not permit a party to a stipulation to qualify, change, or contradict a stipulation in whole or in part’.  Rule 91(e).” 2018 T. C. Memo. 110, at pp. 13-14. (Citations omitted, but they’re the usual “canned brief” types).

Remember, the Section 162 and the Section 165(c)(2) deductions are above-the-line, that is Schedule C type reductions in gross profit that reduce AGI before the Schedule A below-the-line deductions figure in. They’re not subject to the phase-outs for Schedule A deductions, like miscellaneous.

But Martin stiped to miscellaneous characterization.

“However, petitioner’s arguments on brief that he is entitled to an above-the-line-deduction for the restitution payments under section 162(a) or section 165(c)(1) are contrary to the parties’ stipulations.” 2018 T. C. Memo. 110, at p. 15. And Martin doesn’t yell “foul!” so he’s stuck.

So Martin is relegated to unreimbursed employee expense deduction, the now-extinct reef upon which so many petitioners have foundered. So does Martin. While the C Corp treated him as an employee (W-2 type), and the LLC always called him “corporate secretary,” the record is too scanty to establish him as an employee of the LLC. And the LLC is where the trouble arose, hence the restitution. And the restitution was partial repayment of the fraudulent loan, and repayment of loan proceeds (receipt of which wasn’t taxed) isn’t a deduction.

As for promoting Martin’s business, he hasn’t shown how paying back what he and the cos stole via the LLC helped his C Corp’s business.

Finally, although IRS and Martin’s counsel argued about whether restitution is punitive or compensatory, STJ Di doesn’t go there.

“Before a taxpayer is entitled to deduct a loss under section 165(c)(2), he must demonstrate that he has entered into a transaction the primary purpose of which was to make a profit. The business that an officer conducts for a corporation is not his own business.” 110 T. C. Memo. at p. 23.

If anyone made a profit, it was the LLC. The LLC was faking and baking in Estonia. So Martin is out. No deduction.

Takeaway- Must I say it again? Stipulations are the IEDs of litigation; they look so innocent, until they go off, taking your case with them.

This blogpost comes to you late, courtesy of The Jersey Boys’ extravagant good nature. They hosted a remarkable four-hour CPE, whereat were gathered experts from IRS, NYSDTF and NYCDOF, explaining the concurrences and deviations in their taxpayer advocacy and enforcement schemas. The program was intended for tax pros whose clients have limited English (language) proficiency.

Mine had unlimited proficiency, but a selective understanding, of the English language, when I or anyone else told them what they didn’t want to hear. I’ve said it before: every taxpayer needs two tax advisers. One to tell them what the law is, and the other to tell them what they wish the law was. They could then elect whose advice to take.

Well, today the silt stir went on apace.

First, Judge Ruwe in Paul O. Martin and Cynthia M. Montes Martin, 2018 T. C. Memo. 109, filed 7/11/18, doesn’t let IRS reopen the record to put in the Boss Hoss sign-offs. After showing conclusively that whatever petitioners introduced as evidence was woefully deficient, and that they were only entitled to a couple bucks (hi, Judge Holmes) over the pittance IRS allowed them in the SNOD, Judge Ruwe slammed the door on IRS’ reopener motion. And he doesn’t tell us why.

“Compliance with section 6751(b)(1) is part of the Commissioner’s burden of production for those penalties to which the section applies. See Graev v. Commissioner, 149 T.C. , (slip op. at 13-14) (Dec. 20, 2017), supplementing and overruling in part 147 T.C. 460 (2016). Section 6751(b)(1) provides, subject to certain exceptions, that ‘no penalty shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.’

“Respondent concedes that he must demonstrate compliance with section 6751(b)(1) to meet his burden of production. The record does not contain any evidence that respondent complied with section 6751(b)(1). Accordingly, respondent did not meet the burden of production, and petitioners are not liable for the accuracy-related penalty for 2012, 2013, or 2014.” 2018 T. C. Memo. 109, at p. 20. (Citation omitted).

To the contrary, The Great Concurrer and Master Silt Stirrer, Judge Mark V. Holmes, lets in some Boss Hosses and keeps out others in Plentywood Drug Inc., et al., Docket No. 17753-16, filed 7/11/18.

As Plentywood is a Corp (whether C or S not stated, but doesn’t matter), Dynamo teaches us that Section 6751(b) doesn’t apply to corporations. See my blogpost “Howdy, Partner – Part Deux,” 5/7/18.

But the als are human people.

So IRS needs the Boss Hoss sign-offs to chop them. Except there was a question whether the als disputed their chops.

IRS claims the als’ attorney said they weren’t going to fight their chops.

“We reviewed the record in these cases and found that the individual petitioners did in fact dispute the penalties in their petitions, which is important because the Commissioner has the burden of production for showing that he complied with § 6751 in determining penalties against individual petitioners.” Order, at p. 1. (Citation and footnote omitted, but it’s Graev II and Dynamo.)

So, als, asks Judge Holmes, is you is or is you ain’t?

“Petitioners recently filed their response: They say that they already conceded penalties on some issues but that they did not want to concede penalties on others. What petitioners fail to do, however, is object to the Commissioner’s motion or give us a single reason why we shouldn’t grant it.” Order, at p. 2.

So like King Solomon, Judge Holmes cuts the Boss Hosses in twain. No reopener for Plentywood, the Corp, as Boss Hoss not needed for corporate chops; but reopener granted for the als, as the sign-offs are needed and the als haven’t objected.

I was pleased to be able to thank Frank Agostino, Esq., personally for Graev, the blogger’s delight. It’s a gift that just keeps on giving.

Or, Does Greenberg’s Express Run Here Any More?

On a day when the only opinion is a Sum. Op. non-substantiation scarcely worth my time, to say nothing of the more valuable time of STJ Daniel A (“Yuda”) Guy, I turn back to the monumental silt-stir that is Graev.

Judge Holmes was right; Graev was a night-of-the-living-dead, resurrecting cases awaiting written opinion, and stirring silt like a cement-mixer on steroids.

Today we have Calvin G. Walker & Stacy Walker, Docket No. 30216-13, filed 7/10/18. The only issue is reopening the record for Section 6663 fraud chops and Section 6662(a) accuracy-chops. Ex-Ch J L Paige (“Iron Fist”) Marvel has this one, and reopens.

But the way she does it reminded me of Judge Holmes’ silt-stirring concurrence in Graev II, 149 T. C. 23, filed 12/20/17 (see my blogpost “Stir, Baby, Stir – That Silt,” 12/20/17.

“What will happen to Greenberg’s Express?  ‘As a general rule, this Court will not look behind a deficiency notice to examine the evidence used or the propriety of respondent’s motives or of the administrative policy or procedure involved in making his determinations.’  Greenberg’s Express, Inc. v. Commissioner, 62 T.C. 324, 327 (1974) (emphases added) (citing Human Eng’g Inst. v. Commissioner, 61 T.C. 61, 66 (1973)).  Imagine if a taxpayer after reading this Opinion wants to know what really happened behind the scenes for the penalty to have made its way into his notice of deficiency.  How can we deny him discovery about communications between the auditor and the supervisor now that what happens before the Commissioner issues a notice of deficiency is a material fact?  How about communications between auditor and supervisor and any pre-notice advice from counsel?  Will interrogatories be enough or will we create some sort of testimonial privilege or will we just overturn this part of Greenberg’s Express?  Who knows?” Graev II, 149 T. C. 23 at pp. 48-49.

Well, I won’t hold Judge Holmes in suspense any longer, as here’s ex-Ch J Iron Fist’s take.

“ORDERED that respondent’s…motion to reopen the record is granted in that the record is reopened for the purpose of receiving evidence, either in the form of a supplemental stipulation of facts or by way of a supplemental trial regarding the section 6751(b)(1) penalty approval requirement and whether it is met in this case. It is further

“ORDERED that the parties shall have until September 17, 2018, to engage in the informal exchange of information as required by Rule 70, and, if the section 6751(b)(1) issue cannot be developed and resolved informally, to complete formal discovery.” Order, at p. 6.

Stirring times, these.

‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean—neither more nor less.’ C. L. Dodgson, Through the Looking-Glass, 1871.

And when IRS compiles an administrative record in a whistleblower case, it contains exactly what IRS chooses it to contain – neither more nor less.

Except STJ Daniel A. (“Yuda”) Guy doesn’t think so.

Here’s Whistleblower 972-17W, filed 7/9/18, (hereinafter the “Whistler”) who gets to look through the looking-glass via a couple interrogatories (hi, Judge Holmes), and production of the descriptions and accounts of his/her conversations with various ROs and SAs.

Whistler tipped off the Federales about corporate skullduggery involving officer nonreporting of income and nonpayment of FICA. IRS claims they knew that already, and Whistler’s stuff didn’t move the chains.

IRS’ defense against Whistler’s discovery requests is a wee bit lame.

“Respondent maintains that petitioner should not be permitted to conduct discovery because the administrative record as compiled by the Whistleblower Office is the only information that was taken into account in the determination to deny petitioner’s whistleblower claim. Citing Kasper v. Commissioner, 150 T.C. No. 2 (Jan. 9, 2018), respondent asserts that the scope of review in whistleblower cases is limited to the administrative record and that petitioner has failed to establish an exception to the so-called record rule.” Order, at p. 4.

For the Kasper story, see my blogpost “Two Old Cases,” 1/10/18.

Well, this time the administrative record IRS proffers is scanty.

“The Court’s review of the administrative record shows that it contains very little information, other than petitioner’s Form 211, identifying or describing the specific information that petitioner provided to the IRS. While the administrative record indicates that petitioner had multiple meetings and informal contacts with various IRS agents involved in the investigations and examinations of taxpayers 1, 2, and 3, and corporations 1 and 2, described above, there are few records of the dates of petitioner’s meetings and virtually no documents describing the nature and scope of the information that petitioner provided to the IRS agents in question.” Order, at p. 5.

So Whistler gets three (count ‘em, three) interrogatories and two (count ‘em, two) document demands. But in the meantime IRS and Whistler should play nice and swap stuff.

Whistler wanted nonconsensual depositions if IRS didn’t pony up, but that’s premature.

I ask that question because IRS refused to make deals in mines. A year ago, I quoted Aristophanes’ 424 BC smash hit The Knights, where the lead says “When I get drunk I make deals in mines.”

But in Telos CLO 2007-02, et al., Docket No. 6779-17, filed 7/6/18, Judge Chiechi wants IRS to step into the Agora and explain why it refuses to be bound by the appeal to DC Cir in Grecian Magnesite, Industrial & Shipping Co., SA v. Commissioner of Internal Revenue, 149 T.C. No. 3 (2017), appeal docketed, No. 17-1268 (D.C. Cir. Dec. 18, 2017) (Grecian Magnesite).

Grecian Mag had a lot to do with deals in mines. See my blogpost “It’s Not FIRPTA,” 7/13/17, where I dig up (sorry, guys) the whole story.

Judge Chiechi thinks the outcome in the Grecian Mag appeal might settle this case too, as both Telos and Grecian Mag relate “…to the issue of whether gain or loss of a foreign corporation from the sale or exchange of an interest in a partnership that conducts a trade or business in the U.S. is gain effectively connected with such trade or business or loss allowable to such gain. That is an issue common to the instant cases and Grecian Magnesite. Moreover, the appeal in the instant cases would generally lie to the U.S. Court of Appeals for the District of Columbia Circuit.” Order, at p. 1.

Especially is IRS’ sobriety odd because IRS is the appellant in the Grecian Mag case, and the 2017 tax reform act specifically overrules the holding in Grecian Mag by providing that sale of a US partnership interest by an offshore is an asset sale. Thus, Rev. Rul. 91-32, 1991-1 C. B. 107, which got such a pummeling in Grecian Mag, is back on its feet and punching hard. And Congress gave IRS a trump card to play (sorry again, guys).

If the issue is retroactivity, that’s in play whatever happens with Grecian Mag in DC Cir. Whatever the outcome in IRS’ fight with Telos in Tax Court, they’re off to DC Cir.