Like the heroine in Dorothy Fields’ 1936 evergreen, Raju J. Mukhi, Docket No. 4329-22L, filed 5/23/25, isn’t having a fine romance. His out-of-time Rule 161 reconsideration motion gets filed, but Judge Travis A. (“Tag”) Greaves isn’t buying 11 Cir’s rationale that the Section 6677 nonreporting of foreign trusts chops visited on Raju are fines, hence subject to Eighth Amendment Excessive Fines bar.

Even if they are fines, they’re not excessive.

For the backstory, see my blogpost “FBAR = FUBAR,” 4/8/24.

Tax Court has been here before, and Judge Tag Greaves has the stare decisis story.

“The Tax Court adheres to the doctrine of stare decisis and thus affords precedential weight to our prior reviewed and division opinions. See Analog Devices, Inc. & Subs. v. Commissioner, 147 T.C. 429, 443 (2016). Because of our nationwide jurisdiction, the Court takes seriously its obligation to facilitate uniformity in the tax law. See Bankers Union Life Ins. Co. v. Commissioner, 62 T.C. 661, 675 (1974). When one of our decisions is reversed by an appellate court, the Court will ‘thoroughly reconsider the problem in the light of the reasoning of the reversing appellate court and, if convinced thereby, . . . follow the higher court.’ Lawrence v. Commissioner, 27 T.C. 713, 716–17 (1957), rev’d per curiam on other grounds, 258 F.2d 562 (9th Cir. 1958). But if the Court remains convinced that our original decision was right, the proper course is to ‘follow [our] own honest beliefs until the Supreme Court decides the point’ and thus continue to apply our own precedent. Id. Our decision in Golsen v. Commissioner, 54 T.C. 742 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971), created ‘a narrow exception” to this approach. Lardas v. Commissioner, 99 T.C. 490, 494 (1992). In a given case, when a squarely on point decision of the appellate court to which an appeal would lie contradicts our own precedent, we will follow the appellate court’s decision. See Golsen, 54 T.C. at 757. To do otherwise would be ‘futile and wasteful’ given the inevitable reversal from the appellate court. See Lardas, 99 T.C.at 494–95.” Order, at p. 2.

Raju is Golsenized to 8 Cir, which hasn’t spoken, and the 11 Cir case which birthed Raju’s change-in-law argument for late filing wasn’t a reversal of a Tax Court decision. That might have given Raju a leg up, but even 11 Cir didn’t find the chops excessive on the facts.

I do give Raju’s trusty attorneys a Taishoff “Good Try, Second Class.” A good chip from a bunker.

Judge Emin (“Eminent”) Toro is far too well-bred to address James M. Root and Valerie K. Root, T. C. Memo. 2025-51, filed 5/22/25, in such terms, but his findings of fact and opinion come to much the same thing.

Jim and Val wanted to build and operate a multi-purpose natural resource lodge which could provide exclusive upmarket lodging for paying guests. Jim and Val owned and operated a nationally-known fruit packing and processing operation they sold two years after they say they started the hospitality gig.

I’ll spare you the sad tale of the condemned construction project and the litigation that followed. Jim and Val paid $4 million in fees to recover $3 million. The property wasn’t zoned for commercial use.  Nobody could live there. Jim and Val didn’t have advertising, employees, or hospitality software, but they did have various times they claimed they started the hospitality gig, over a fifteen-year span.

Lest I be misunderstood, I understand a good deal of this is the work of Jim’s & Val’s trusty attorneys, trying to salvage an already-sunken ship. Jim and Val got took.

At the end, Judge Eminent has much somber reasoning and copious citation of precedent to the effect that to be a business, you have to be in shape to perform the activities the business demands. Just buying a site isn’t enough; even starting construction isn’t enough. At least you have to advertise and seek renters. And running freebies doesn’t get it.

Nor does getting a license to operate. There has to be activity.

“To summarize, although the Roots hosted some events on their property between 1995 and 2009, none of them included overnight stays at the lodge. Even when the Roots donated an overnight stay at their lodge, the guests ultimately stayed on another location on the property. Hosting on the property was occasional and isolated and insufficient to demonstrate the operation of a guest lodge.” T. C. Memo. 2025-51, at p. 16.

In short, for an NOL, you need a business and a loss.

Transfer pricing Section 482 geeks have been breathlessly awaiting Judge Cary Douglas Pugh’s exegeses of Temp. Reg. § 1.482-7T(a)(2), (b)(1)(ii), (c)(1), Reg. § 1.482-1(e), and Reg. §§ 1.482-7T(g)(4) and (i)(6). Here  they are at last, Facebook, Inc. & Subsidiaries, 164 T.C. 9, filed 5/22/25.

Spoiler alert: IRS wins, except, as we say in the computer world, GIGO (garbage in equals garbage out).

IRS’ experts used wrong inputs in figuring income method valuations for present value of arms’-length Platform Contribution Transactions. Facebook (parent) divided the world between USA and Canada (parent kept it) and rest of the world (given to wholly-owned Irish subsidiary). Parent handed Irish all its IP and hardware. They made cost sharing and technology development agreements, but had to value the present worth of what they gave the Irish, so the Irish could pay parent back over time (IRS has no problem with the payback schedule). The payback, of course, is US-taxable to parent.

Parent claims the NPV of the stuff at transfer in 2009 was $6.3 billion; IRS claims $19.945 billion.

You can see why Judge Pugh needs 130 (count ’em, 130) pages to send the parties off for a Rule 155 beancount, and nine (count ’em, nine) pages to set forth the expert witnesses’ CVs at dates of their testimony.

There are 23 (count ’em, 23, and I have) attorneys appearing for Parent, and 17 (count ’em, 17) for IRS. The noise of all those meters ticking must have been deafening.

IRS used a $1.9 billion plug figure (“Other Revenue”) but that flunks the presently-existing test of the regs. And Judge Pugh finds IRS’ expert fudged Acquisition Costs. Another IRS failing is a miscalculated beta (volatility). “We find that Dr. N’s discount rate is not a reliable reflection of the market-correlated risks of participating in the actual CSA because he failed to provide empirical support for his selected percentage premia (2% for its pre-IPO stage and 1% for its early monetization stage).” 164 T. C. 9, at p. 92. (Name omitted).

Judge Pugh almost throws up her hands when reckoning the discount rate, but finally buys something that varies but .02 from Facebook’s. 164 T. C. 9, at p. 100.

Judge, I feel your pain.

Amongst my ultra-sophisticated readers there are no doubt not a few who can answer the nine (count ’em, nine) conundrums posed by Judge David Gustafson to IRS and Consolidated Sportsmen of Lycoming County, Docket No. 18549-23X, filed 5/22/25 (Happy Palindrome Day!), without batting a cliché.

I, unhappily, am a stranger to Section 501(c)(7), never having encountered in the wild a social club “’substantially all of the activities of [a social club] are for [‘pleasure, recreation, and other nonprofitable’ purposes.” Order, at p. 2. The Sports were incorporated in 1931 and got a 501(c)(7) exemption letter in 1981.

But sometime before 2011, the Sports struck oil, and more than 35% of their gross receipts came from nonmember royalties. So IRS retroactively bounces the 501(c)(7) exemption (for which years is not clear; see infra, as my expensive colleagues would say). That 35% number is part of the conundrum barrage, as same appears neither in statute nor regulation but in some kind of legislative history; son of the infamous Primoli memorandum? Judge Gustafson suggests giving this the Loper Bright treatment.

So what about activities? Does that mean members’ activities, or the entity’s? Is inurement to individuals’ benefit an issue? If so, was there any?

The Sports’ 501(c)(7) letter said “If your purposes, character or method of operation change, please let us know so we can consider the effect of the change on your exempt status.” Order, at pp. 3-4. The Sports did put the oil money they got on their 990s each year. Is that “letting us know?” Does the fact that IRS got the 990s and gave the Sports a pass each year have any effect on retroactivity?

More about retroactivity. See Order, at pp. 3-5. Judge Gustafson is on a tear again. He must have been the best cross-examiner the Palmetto State produced since John Calhoun, because his attack on IRS’ somewhat casual process and pleading will have IRS scrambling in its own end. Briefly, if the 990s told the story, what is IRS’ basis for retroactivity? Did they explicate their reasons for bouncing retroactively per Rev. Proc. 2024-5, sec. 12.03, whether in NOD or pretrial brief? If not, is the retroactivity new matter, giving IRS BoP? Note this is a Rule 122 stiped facts, so it’s all gotta be in the supplemental briefs Judge Gustafson orders.

And if what the Sports did wasn’t letting IRS know, let IRS tell Judge Gustafson what would be.

Finally, let both sides throw in anything else on point.

Remember, guys “(T)his order states the facts as they appear, upon first reading of the parties’ papers, to a judge who has much to learn about this case and about the applicable law. This order makes no findings or holdings, and we invite the parties’ corrections of any factual or legal errors, whether explicit or implicit, that they perceive.” Order, at p. 1.

He’s “jest a country lawyer.” Yeah, right, roger that.

Danny wrote The Shortest Way With Dissenters in 1702 using 29 pages, but Judge Goeke needs only five (count ’em, five) to send off the latest dissenters in JC Aggregates, LLC, Ornstein-Schuler, LLC, Tax Matters Partner, Docket No. 29327-21, filed 5/21/25.

See my blogpost “The Perpetuity Punt – Part Deux,” 5/1/25, for backstory.

This is the latest iteration of last-minute wannabe intervenors in one of the 34 (count ’em, 34) consolidated cases in the Dixieland Boondockery trainwreck. The settlement terms have been agreed, but unlike others where this cottage industry is involved, footnote 3 at p. 2 tells why this motion to intervene is timely. IRS blew the 60-day Rule 248(b) cutoff, and the holders of 1.94% of JC Aggregates are in.

Except.

They still need to make a substantial showing why. They don’t. They’re out.

“In short, (1) Putative Participants own only 1.94% of JC Aggregates and the overwhelming majority of partners have shown no disagreement with the proposed settlement; (2) Putative Participants have made no showing that any investigation regarding Messrs. Ornstein and Schuler, or any related entity, has affected OS’s ability to act in the best interests of JC Aggregate’s partners; (3) the terms of the settlement appear to be reasonable; (4) there has been little showing that Putative Participants are prepared to litigate the case and/or shoulder the financial burden of doing so; and (5) Putative Participants’ other claims are of little merit or relevance.” Order, at p. 4. (Footnote omitted, but it says the settlement is “all or nothing.” If everyone in JC Aggregates doesn’t settle, nobody settles.)

Reminds me of a couple local Americans with Disabilities Act stick-ups (hi, Judge Holmes).

I have to give Hale E. Sheppard, Esq., and his stalwart squad a Taishoff “Good Try, Second Class” for their ingenious Boss Hossery in Hancock County Land Acquisitions, LLC, Southeastern Argive Investments, LLC, Tax Matters Partner, T.C. Memo. 2025-50, filed 5/20/25. Whoever amongst Hale and his five (count ’em, five) compañeros came up with this one deserves it.

Malheureusement, Judge Albert G. (“Scholar Al”) Lauber, ace basher of Dixieland Boondockeries, will have none of it.

 It’s the IRS summary J classical gambit for Section 6751(b) Boss Hossery on the 20%-40% Section 6662 chops. Classical defense: was there proper delegation from Secretary; need discovery to see who did what; was Boss Hossery timely; wasn’t the real determination made by IRS High Command; Notice 2017-10 was the real determination.  The usual ripostes: CPAFs duly e-signed; Kroner and Laidlaw Harley Davidson supe was supervising when chops announced; general pronouncements from on high and notices not directed to any particular taxpayer for any particular transaction or year.

OK, im Westen nichts neues.

Except.

“Alternatively, at least with respect to the valuation misstatement penalties, petitioner asserts that HK and STH made the ‘initial determination of the penalty assessment.’ See §6751(b)(1). Messrs. K and H, senior in-house appraisers employed by the IRS, prepared an ‘appraisal review report’ that evaluated the appraisal submitted with Hancock’s return. Their report, which RA S received in August 2019, concluded that the fair market value of the donated easement was $5,169,400 rather than $180,177,000.

“’Once [an easement’s] value is determined,’ petitioner says, ‘the application of section 6662(h) is simple arithmetic.’ If Messrs. K and H made the ‘initial determination of [the penalty] assessment,’ see § 6751(b)(1), their supervisor, not RA S’s supervisor, would supposedly have been the proper person to consider penalty approval. Petitioner contends that uncertainty on this point creates a genuine dispute of material fact precluding summary judgment.” T. C. Memo. 2025-50, at p. 10. (Names omitted).

Judge Scholar Al clears that puck to the boards.

“In-house IRS appraisers do not have the authority to ‘determine’ penalties; they simply offer an opinion as to value. During an IRS examination it is the duty of the revenue agent to determine penalties, taking into account (among other things) the value of the property contributed and possible defenses the taxpayer may have. The word ‘determination’ has “an established meaning in the tax context and denotes a communication with a high degree of concreteness and formality.’ Belair Woods, 154 T.C. at 15. An ‘initial determination’ signifies a ‘consequential moment’ of IRS action. Ibid. (quoting Chai v. Commissioner, 851 F.2d at 221).” T. C. Memo. 2025-50, at p. 11.

A preliminary analysis by an in-house appraiser isn’t that.

Taishoff says, that quote from Chai reminds me ya gotta love what The Jersey Boys unleashed on the world so many years ago; such a fabulous cornucopia of blogfodder. In a world plagued with war, hatred, drug addiction, population collapse and overpopulation, half the world obese and the other half starving, and deadly diseases, some our best minds are occupied with trying to find ways to undermine Section 6751(b).

Sorry, my bad. Off the soapbox.

Maybe the fact that the Federal indictment for mail fraud, wire fraud, and money laundering was tossed, and his allegations that his boss conspired with “former disgraced FBI agents to seize substantial funds from [petitioner] and to convict him of non-existent crimes” to steal $642K from his wholly-owned LLC might have suggested to Appeals to do a better job building an NEH-ETA record, rather than relying upon a doubt-as-to-collectability shootdown in John Joseph Bauche, T. C.  Memo. 2025-48, filed 5/20/25. The quoted matter is from p. 15.

Ex-Ch J L. Paige (“Iron Fist”) Marvel stresses she isn’t buying JJ’s story, but Appeals should have built a better record, especially after a remand to Appeals and a Supplemental NOD.

While JJ’s representatives filed the OIC asserting economic hardship (hence raising doubt-as-to-collectability), and since taxpayer can raise only one reason for each OIC, was Appeals right not to consider NEH-ETA?

“We will make our point plainly: An alleged corrupt public-private conspiracy to loot [JJ’s LLC]’s bank account, which allegedly resulted in petitioner’s inability to pay his tax liabilities, is a public policy or equity issue that needed to receive due consideration. We take no position on the merits of those allegations, but they needed to be appropriately considered in accordance with the IRM. The current administrative record is insufficient to permit us to review this matter adequately, necessitating a remand. We do not hold that an immediate referral [to  NEH-ETA Austin] was required but only that a referral (or at least consideration of how petitioner’s ETA OIC might receive appropriate review on NEH grounds) should have taken place once Appeals exhausted its consideration of petitioner’s ETA OIC on economic hardship grounds. Cf. IRM 5.8.11.5.1(3) (providing that generally ‘all cases must have been completely developed under all other bases before transfer will be accepted by the Austin [Office]’). This case is akin to Bogart, T.C. Memo. 2014-46, at *11, in which we concluded that the Commissioner ‘did not adequately consider’ NEH grounds where the taxpayers ‘requested relief on public policy and equity grounds’ but the Appeals officer ‘merely concluded that the ETA OIC did not merit consideration under public policy or equity grounds.’” T. C. Memo. 2025-48, at p. 37.

For the Bogart story, see my blogpost “Leftovers,” 3/19/14.

Remember, Appeals goes to Austin only with a fully-completed record. So Back to Appeals.

“We will specifically direct Appeals to consider (1) whether petitioner should be allowed the standard local housing expense because of special circumstances, (2) whether petitioner’s use of line of credit proceeds for legal fees meets the necessary expense test, (3) petitioner’s recent claim… that part of his time is now occupied assisting with caregiving for his elderly father, who has significant health problems, and (4) how to classify petitioner’s current employment or unemployment status for purposes of calculating his future income value (e.g., whether petitioner is still properly classified as temporarily or recently unemployed).” T. C. Memo. 2025-48, at p. 34.

Now I don’t buy, or reject, JJ’s story either. From what I know of asset forfeiture cases, there’s a great temptation for law enforcement to grab first and let the owner sue to get it back; they needn’t convict, or indict, or even get a warrant.

So while the toss of JJ’s indictment is just circumstantial evidence of the need for NEH-ETA public policy consideration, as Hank Thoreau said, circumstantial evidence can be strong when you find a trout in the milk.

It’s eleven years and more since I first described The Phone Call; see my blogpost thus entitled 4/15/14. But the occasions for that unpleasant occurrence have not diminished. I fear that whoever prepared the 706 in Estate of Martin W. Griffin, Deceased, Christopher Griffin, Executor, T. C. Memo. 2025-47, filed 5/19/25, may have received The Phone Call, and may have had to telephone an insurer in consequence.

I’ve been there. It’s no fun, even when you win.

Briefly, the late Martin set up one (or maybe two) trusts for Maria, surviving spouse. The first trust was $2 million, Maria getting all benefits while she lived. Upon Maria’s exit, whatever’s left goes “to or for the benefit of such one or more members of a class of persons consisting of the Beneficiary’s Descendants,” as Maria directs, except none of it goes to Maria’s estate. T. C. Memo. 2025-47, at p. 3.

Upon reading the last above-written paragraph, all my ultra-sophisticated readers cried out as one “Section 2056(b)(7) QTIP!”

The following is not intended for such as they. For civilians, bequests to surviving spouse are exempt, provided whatever survivor gets is taxed in his/her lifetime or taxed in his/her estate. What surviving spouse got that survives surviving spouse’s death is terminable interest property. Anything that surviving spouse got that tries to escape taxation, either gift or estate, doesn’t. The exception is Qualified Terminable Interest Property (QTIP). That election moves QTIP into surviving spouse’s estate if so elected on first-to-die’s 706.

“The estate did not make a valid QTIP election for the $2 million bequest on Form 706. The estate admits as much by stating that it ‘failed to evidence such a QTIP election with respect to the $2,000,000 [b]equest on Part A of Schedule M of the Form 706.’ Accordingly, the $2 million bequest is not QTIP and is includible in decedent’s estate as terminable interest property.  And the estate has not identified anything on the return that shows anything resembling ‘affirmative intent’ to make a QTIP election. We do not find it necessary to address the other two requirements for QTIP because the estate’s failure to make an affirmative QTIP election disqualifies the $2 million bequest from being QTIP.” T. C. Memo. 2025-47, at pp. 6-7.

Petitioner’s trusty attorney takes a desperation goalmouth swipe at the puck as it enters the net and the red light flashes.

“The estate contends that the $2 million bequest might still be QTIP because respondent did not mention a problem with the QTIP election (or lack thereof) during the audit process.” T. C. Memo. 2025-47, at p. 7.

He gets a Taishoff “Good Try, third class.” He also gets a brushoff from Judge Nega.

“Because of this supposed shortcoming, the estate invites us to adopt a novel substantial compliance approach and analyze whether the $2 million bequest might qualify as QTIP. The estate’s argument is a nonstarter. The Court generally does not look behind a Notice of Deficiency. Full-Circle Staffing, LLC v. Commissioner, T.C. Memo. 2018-66, at *25 (“A trial before the Court in a deficiency case is a de novo proceeding; our decision is based on the merits of the record before us and not on any previously developed administrative record.”), aff’d in part, appeal dismissed in part, 832 F. App’x 854 (5th Cir. 2020). Since no QTIP election was made with respect to the $2 million bequest, that bequest is not QTIP.” T. C. Memo. 2025-47, at p. 7. For the full circle on Full-Circle, see my blogpost “Hold the Watchman Accountable,” 5/17/18.

But a $300K bequest that IRS claims is an impermissible amendment to the $2 million trust (which is supposedly irrevocable and unamendable) turns out to be a separate trust under State (KY) law. The amendment to the trust calls this a “living expense reserve,” specifically says that any leftovers go to Maria’s estate, and that’s good enough for Judge Nega.

“The question of whether the $300,000 bequest will go to Ms. Creel’s estate upon her death or pass according to the distribution provisions of the [$2 million] Trust turns on whether the $300,000 bequest created a separate trust from the [$2 million] Trust.

“On the basis of the use of the phrase ‘living expense reserve’ and the specification of distinct distribution provisions that clearly conflict with the existing provisions of the irrevocable… agreement, we find that decedent intended to create a trust with the $300,000 bequest and intended for that trust to be administered by the same person administering the [$2 million] Trust. Bolstering this conclusion is the fact that the $300,000 bequest contemplates how any remaining amount will be distributed upon Ms. Creel’s death, whereas the $2 million bequest contains no comparable provision. Further, the $2 million bequest does not use the phrase ‘living expense reserve’—indicating a distinction between these two bequests. Decedent intended for the $2 million bequest to be transferred to the [$2 million] Trust and governed by the provisions of that trust. But he intended for the $300,000 bequest to be a part of a legally distinct trust administered by the same trustee overseeing the [$2 million] Trust.” T. C. Memo. 2025-47, at pp. 9-10. (Footnote omitted, but it says the drafting of the $300K is not as indicative as a separate trust would be; understatement).

In short, trusty attorney saves part of the $1,047,398 deficiency (plus 20% chop). But whoever prepared the trust documents and the 706 has probably gotten The Phone Call, and has made their own.

Once again, I take the title of today’s online drama from the long-running Britcom from Grace Brothers department store. Alberto Garcia, Jr., 164 T. C. 8, filed 5/19/25, says he never was, but IRS claims they have a 2014 default judgment in USDCSDTX.

Judge Emin (“Eminent”) Toro denies IRS’ motion for summary J, saying it’s a fact question whether Al Jr., was served in the TX litigation. If not, USDCSDTX had no jurisdiction, and SOL has run (apparently fraud not on the menu) on the $129K plus of Al Jr.’s alleged tax debt.

OK, so let’s have a trial.

But wait. No SND or NOD alleged. Al Jr. claims Section 7345 passport grab without substantial tax delinquency. His argument is that the defective USDCSDTX judgment is not legally enforceable, hence IRS out under Section 7345(b)(1).

“To resolve the Motion, we must decide a question that we have until now found unnecessary to answer in passport cases: What is the scope of our review or, put differently, on what evidence do we determine whether the Commissioner’s certification that a seriously delinquent tax debt exists is correct?” 164 T. C. 8, at pp. 3-4. (Footnote omitted, but it cites a bunch cases (hi, Judge Holmes) that I’ve blogged that say it wasn’t necessary before now.

All previous passport grabs were record-rulers.

Here, the NFTLs and NITLs are north of 15 (count ’em, 15) years old. Al Jr, filed a CDP on only one, and that CDP concluded north of 15 years ago. The one more recent assessment and NFTL was for $44, but that’s too small to figure in here. 164 T. C. 8, at p. 5, footnote 5.

After Al Jr.’s pro bono calendar callers first raised the non-service, Al Jr. retained counsel who said he would go to USDCSDTX, but apparently hasn’t gotten anywhere so far.

All previous Tax Court passport grabs were on uncontested facts. So mox nix whether record rule abuse of discretion or de novo is the standard of review, same result. But here the facts are in dispute.

The Van Bemmelen diss of summary J isn’t at issue here. Passport grabs essentially go off on Rule 122(a) agreed-facts; at least up to now.

All but one of the Section 7345(b) elements for seriously delinquent tax debt have been checked. That one is “legally enforceable.” And since SOL has run on everything but the USDCSDTX judgment (20 years), the seriously delinquent tax debt stands or falls on the validity (or otherwise) thereof.

Now pore l’l  ol’ Tax Court’s circumscribed jurisdiction only allows Judge Eminent and his equally eminent colleagues to decide the validity of IRS’ certification. If the amount of liability has been assessed, Tax Court cannot look behind to see if it had been properly assessed. That should have been hashed out in a deficiency case. NFTLs and NITLs should have been resolved at a CDP.

“At a minimum, however, the phrase ‘legally enforceable’ requires an inquiry into whether the limitations period for collection after assessment has expired with respect to all or part of the liability. See Ruesch, 154 T.C. at 296 (‘We are also authorized to consider whether the tax debt “has been fully satisfied or has become legally unenforceable.” Sec. 7345(c)(2)(A). The latter would be true where the collection period of limitations had expired. See sec. 6502(a).’; see also Adams, 160 T.C. at 12 (‘[A]lthough our opinion in Ruesch was deprived of its precedential effect, it has not lost its persuasive value.’).” 164 T. C. 8, at p. 10. 2 Cir dismissed appeal of Ruesch as moot when IRS folded and undid the grab.

For Ruesch, see my blogpost “Ruesch to Judgment,” 6/26/20. For Adams, see my blogpost “Section 7345 – Backdoor CDP?” 1/24/23.

Now 28 USC §3001, the Federal Debt Collection Procedures Act, has been interpreted by 9 Cir to set no limit on enforcing a Federal judgment for a Federal debt, and 5 Cir has said “amen” in an unpublished opinion. But IRS has only asserted 20 years here, so Judge Eminent ducks Federal debt collection SOL. But here, says Taishoff, be dragons.

Judge Eminent goes with somber reasoning and copious citation of precedent going back to at least 1818 that a judgment obtained without personal jurisdiction over a party is void as against the unserved party. Y’all learned that in first-year law school Procedure 101.

IRS does have a 1931 case where Tax Court’s mama, the Board of Tax Appeals, held that a petitioner could not collaterally attack a USDC judgment in Tax Court. But that case involved someone who was admittedly served but claimed that service didn’t rope in his wholly-owned corporation. Here, Al Jr, was never served at all, he says.

The APA limitation on agency review to record rule is a default rule. Judge Eminent reviews redetermination SND jurisdiction, contrasting it with Section 7623 whistleblowing record-ruling, innocent spousery pre-Section 6015 (e)(7) review de novo, and CDP record-ruling.  

 Section 7345(b) requires Tax Court to determine legal enforceability, not just to “review” the certification. The magic word is “determination.”

“…we take Congress’s choice to refer to our task as “determin[ing] whether the certification was erroneous” to mean that (where necessary) we must make that determination based on a record developed in this Court, including (where appropriate) any evidence introduced at a trial, not simply the record available to the Commissioner during the administrative process.” 164 T. C. 8, at p. 19. (Footnote omitted.)

Anyway, there haven’t been any cases like this before, and in the ten (count ’em, ten) years since Tax Court got Section 7345 cases they’ve all gone off on record rule.

Go try the case.

Taishoff says, if Al Jr, wins in Tax Court, can that determination do any more than void the passport grab?  What is the preclusive effect of such win, if any, as against IRS in USDCSDTX? Did IRS’ concession of the unlimited USFDCPA SOL set a precedent? Fortunately, this case is a one-off.

Ex-Ch J L. Paige (“Iron Fist”) Marvel provides another Cliff Notes quick-study for nonattorney aspirants to Tax Court admission at pp. 3-4 of Anthony Angelo Masciantonio & Barbara Elaine Masciantonio, Docket No. 16236-22, filed 5/16/25.

Petitioners seek abatement of interest after they stiped out deficiencies and chops.

“Under section 6404(e)(1)(A), the Commissioner may abate part or all of an assessment of interest on any deficiency that is attributable to an unreasonable error or delay by the Commissioner’s employees or officers in performing a ministerial or managerial act. To qualify for an abatement of interest, the taxpayer must (1) identify an error or delay by respondent in performing a ministerial or managerial act; (2) establish a correlation between the error or delay by respondent and a specific period for which interest should be abated; and (3) show that the taxpayer would have paid his or her tax liability earlier but for such error or delay. When enacting section 6404(e), Congress intended for the Commissioner to abate interest where failure to abate interest would be widely perceived as grossly unfair and did not intend that abatement be used routinely to avoid payment of interest.

“A managerial act means an administrative act that occurs during the processing of a taxpayer’s case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel. Treas. Reg. § 301.6404-2(b)(1). A ministerial act means a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer’s case after all prerequisites to the act, such as conferences and review by supervisors, have taken place. Treas. Reg. § 301.6404-2(b)(2). A decision concerning the proper application of federal tax law is neither a managerial nor a ministerial act. Treas. Reg. § 301.6404-2(b)(1) and (2). Section 6404(e)(1) also does not provide for abatement of interest if a ‘significant aspect of the error or delay is attributable to the taxpayer involved.’” Treas. Reg. § 301.6404-2(a)(2).” Order, at p. 3. (Citations omitted).

Tax Court has exclusive jurisdiction over abatement claims. Petitioners need to duck the Section 7430(c)(4)(A)(ii) $2 million net worth bar; that’s each spouse for MFJs.

While standard of review is abuse of discretion, abatement cases aren’t record-rulers; there’s de novo for evidence.

Here, all petitioners had was materiality and relevancy objections to the admin record. They had no evidence outside the admin record.

“Rule 93(a), however, requires the entire administrative record (or so much of it as either party may deem necessary for a complete disposition of the issue or issues in dispute) to be filed with the Court no later than 45 days after the notice setting the case for trial is served ‘if judicial review of the Commissioner’s determination ordinarily would be based solely or partly on the administrative record.’ While we may consider materials outside the administrative record in an interest abatement case, review of the Commissioner’s decision not to abate interest for abuse of discretion is ordinarily based partly on the administrative record, and filing the Administrative Record was thus required regardless of petitioners’ views as to its relevance or materiality.” Order, at p. 4. (Footnote omitted).

The stip doesn’t help, as all it says is interest will accrue and be assessed as provided by law.

“Section 6601(a) provides that if ‘any amount of tax imposed by this title . . . is not paid on or before the last date prescribed for payment, interest on such amount at the underpayment rate established under section 6621 shall be paid for the period from such last date to the date paid.’ See §§ 6072(a), 6151(a) (generally prescribing the last payment date for calendar-year taxpayers as the 15th day of April following the close of the calendar year); see also § 6601(b)(1). This is true even though the amount of tax imposed is the subject of preassessment litigation in this Court, at least in the absence of a cash deposit. Cf. § 6603(a) and (b) (providing a method for a taxpayer to halt the accrual of interest on unassessed tax by making a cash deposit).” Order, at p. 5.

Note that the dubious legal advice provided by IRS counsel (described in Order at pp. 4-5) is neither administrative nor ministerial.  Statute and regs, guys, nothing else.