Today ex-Ch J Michael B (“Iron Mike”) Thornton grapples with an Emmenthaler administrative record (that’s the cheese with all those holes), multiple tax returns for the same year, an account transcript showing “$0,” an OIC-DATL IRS admits they got, with a Form 433-A to match, and documents without authenticating affidavits from both sides.

Ex-Ch J Iron Mike, exhibiting patience worthy of a professor reading essays from law students only vaguely aware of the subject matter but desperately in need of what we called a “hook-minoo” on The Hill Far Above, gently suggests as follows.

“We will give the parties an opportunity to supplement their motion and opposition to bring them into compliance with the Court’s Rules.” Order, at p. 3.

There follows four (count ‘em, four) pages of How To Do It, supplementing the two previous pages.

The case is Eddie Booker, Docket No. 27354-16L, filed 4/4/18.

To avoid embarrassing counsel, I’ll not quote ex-Ch J Iron Mike’s remonstrances.

But I advise counsel to read the order, and to mark, learn and inwardly digest the same, lest they, too, fail to get the “hook minoo.”

I wish ex-Ch J Michael B (“Iron Mike”) Thornton had designated this one, as it’s a cautionary tale for lawyers. Even when the client comes tearing at the last red-hot minute at day’s end of Day Ninety, if there’s anything spousal in play, ask if both spouses are in.

Here’s Cardell S. Jones, Docket No. 3996-17, filed 4/3/18. But it’s not Cardell’s story, rather it’s Johnnie M. Jones; in private life she’s Mrs. Cardell.

IRS issued separate but equal SNODs to Cardell and to Johnnie. But only Cardell petitions, and Cardell’s attorney enters appearance for Cardell only. No mention of Johnnie until long after Day Ninety, when attorney moves to change caption, adding Johnnie.

Attorney claims  “Petitioner gave Counsel his Notice of Deficiency however, Counsel was not apprised of a separate Notice of Deficiency for Petitioner’s wife, Johnnie M. Jones.” Order, at p. 1.

IRS says, so sad, too bad, but Rule 41(a) prohibits any amendment that would confer jurisdiction where none had theretofore been established.

“Petitioner’s counsel asserts that because petitioner and Ms. Jones ‘are married[,] * * * own the same assets[,] and filed their tax returns jointly’, she ‘has an interest in the subject matter and not joining as an indispensable party would impede her ability to protect her interest.’ Although a husband and wife may file a joint tax return, they are treated as separate taxpayers; nothing in section 6212(b)(2) prohibits respondent from sending separate notices of deficiency even though a joint return may have been filed. See Garfinkel v. Commissioner, 67 T.C. 1028, 1030 (1977); Rodney v. Commissioner, 53 T.C. 287, 307 (1969); Dolan v. Commissioner, 44 T.C. 420, 433 (1965).” Order, at p. 2.

Now Johnnie could ratify the petition if she had been named therein to begin with and hadn’t signed.

But that doesn’t cut it here.

Ex-Ch J Iron Mike: “…this case involves not a joint notice of deficiency but separate notices of deficiency issued to petitioner and Ms. Jones. And in the light of the representation by petitioner’s counsel that he was ‘not apprised’ of any notice of deficiency having been issued to Ms. Jones when he filed the petition in this case, we do not see how he could have intended to file the petition on behalf of Ms. Jones as well as petitioner. In addition, the petition makes no mention of Ms. Jones but rather references petitioner only in the singular. In these circumstances we conclude that there was no intent on behalf of petitioner’s counsel to file a timely petition placing Ms. Jones’ tax liabilities…in issue and thus there was no original petition filed on Ms. Jones’ behalf for her to ratify. See Normac, Inc. v. Commissioner, 90 T.C. 142, 148 (1988); Cordero v. Commissioner, T.C. Memo. 1991-9, at *14.” Order, at p. 3.

But wait, there’s more, as the late-night telehucksters say.

“Although petitioner’s counsel claims in the motion that he was not ‘apprised of a separate Notice of Deficiency for Petitioner’s wife, Johnnie M. Jones’, we note that the notices of deficiency attached to respondent’s objection each include a Form 4089-B, Notice of Deficiency-Waiver. The Forms 4089-B each indicate that a copy of the notice of deficiency was sent to the taxpayer’s authorized representative, JGG, whose name also appears on the petition and who also filed the motion presently before us. The reliability of petitioner’s counsel’s foregoing statement is therefore called into question. Moreover, the fact that Ms. Jones’ name appeared on certain attachments to the notice of deficiency issued to petitioner should have alerted petitioner’s counsel that a notice of deficiency may also have been issued to Ms. Jones. As far as the record shows, however, counsel made no effort to determine whether Ms. Jones had also received a notice of deficiency and, having failed to file a petition on her behalf, did not attempt to remedy the dereliction until over a year after filing the petition on petitioner’s behalf.” Order, at p. 3. (Name omitted; there but for the grace of you-know-Whom goes any of us).

Takeaway- The hidden spouse trick can be played by IRS as well as by clients. Ask at intake. Even at the last hour.

Thus spake Gardner N. Marcy and Maria Marcy, 2018 T. C. Memo. 42, filed 4/3/18, and IRS’ counsel. Gardner and Maria tried to bury a million or so of capital gain in a Jenkins & Gilchrest son-of-BOSS, which IRS torched.

Everyone concedes there was no economic substance in the deal, no business was done, no true pooling of labor, goods, money or skill. But has l’il ole’ Tax Court jurisdiction make such a finding in a non-TEFRA deficiency proceeding?

Judge Gale: “We conclude that we do.” 2018 T. C. Memo. 42, at p. 12.

Whatever the litigants agree, they cannot confer jurisdiction on the court; only Congress can do that.

But the phony entity didn’t file a partnership return.

And the concessions plus trial evidence shows there never was a partnership, so Section 6221 doesn’t apply.

Thus Tax Court can redetermine the deficiency and the good-faith defense to the chops.

Three years ago this month I expressed myself hurt that Joan Farr f.k.a. Joan Heffington did not invite me to join Association For Honest Attorneys, 2018 T. C. Memo. 41, filed 4/3/18.

See my blogpost “Why Didn’t She Ask Me?” 4/20/15.

But now that I’ve read Judge Chiechi’s review of the goings-on at that ex-501(c)(3), I’m really glad Joan never asked me.

“Specifically, Ms. Farr used petitioner’s checking account … to make certain purchases from certain department stores and grocery stores, such as Dillard’s, Walmart, Kwik Shop, Kohl’s, Walgreens, and Dillons.  In addition, Ms. Farr used petitioner’s checking account … to make automobile-related purchases from certain vendors, such as QuikTrip, A&A Auto Salvage, Derby Quick Lube, K-15 Auto Salvage, and Meineke.  Ms. Farr also used petitioner’s checking account…to make certain home-related and real-estate related purchases from certain stores, such as Slumberland, Westar Energy, Lowes, T&S Tree Service, Gene’s Stump Grinding Service, Dutch’s, Echostar Dish, Allstate, Roberts Overdoors Inc., Lusco Brick & Stone, MY Construction, and Star Lumber & Supply.  In addition, Ms. Farr used petitioner’s checking account …to make certain payments with respect to a USAA credit card.  Ms. Farr also used petitioner’s checking account…to make a $189.50 payment to an animal clinic and a $7,750 payment to St. John’s Military School for tuition for her son, and another $100 payment to that school.  In addition, Ms. Farr used petitioner’s checking account…to pay $2,200 for the exhumation and DNA testing of Ms. Farr’s father’s remains.” 2018 T. C. Memo. 41, at pp. 7-8.

Oh, and the Eighteenth Judicial District Court of Sedgwick County, KS, entered default judgment against Joan for unauthorized practice of law and consumer fraud.

But Joan is irrepressible.

“Ms. Farr continued…to provide in petitioner’s name unauthorized legal assistance to certain individuals, including herself with respect to, inter alia,  her challenges to the …injunction and the fines imposed by the Sedgwick County district court against her for practicing law without a license, her arrest for hosting an underage drinking party, and a lawsuit filed against a local school district regarding her son.” 2018 T. C. Memo. 41, at p. 14.

Joan and the Association For Honest Attorneys aren’t exempt from tax. Why am I not surprised?

Footnote, 10/10/18: Joan Farr a/k/a Heffington has decided there is no honest attorney left, after 10 Cir. affirms Judge Chiechi in Farr v. Com’r, 18-9002, 10/1/18. I beg to differ, of course. Once again, my colleague Peter Reilly, CPA, brought this to my attention. I only report Tax Court.

I was writing yesterday, 4/2/18, about what I thought was a new dodge, ploy or gambit. See my blogpost “A New Gambit?” 4/2/18.

It seems the gambiteers, if such indeed they are, were willing to stump up the sixty bucks, as their petitions weren’t tossed for nonpayment.

But here’s one who isn’t, and I find it inexplicable.

Crae Robert Pease, Docket No. 21854-17, filed 4/3/18, only wanted 1997 through and including 2016; he didn’t petition for a year presumptively still not concluded.

Why waste time with a petition for twenty (count ‘em, twenty) years of SNODs and NODs, and then fold when it’s time to ante up? Maybe he thought he’d get an answer for free.

What am I missing?

Edited to add, 12/12/20: He didn’t pay. 

We Tax Court aficionados are always on the lookout for the latest dodge, ploy or gambit. I’m seeing a trend lately that has to be one thereof,  but I can’t figure out what the game is.

It seems to be a variant of the flood-the-zone, where the dodger or ployer or gambiteer showers IRS with requests or demands.

The move seems to be to petition many years at once. When these petitions first started coming in the last couple months (hi, Judge Holmes), IRS moved for more definite statement (Rule 34), but those were denied.

So now IRS responds it can’t find a SNOD or NOD issued to the petitioner for any of those years, and the petition is tossed.

Here’s an example, Jason Terell Griggs, Docket No. 26913-17, filed 4/2/18.

JT petitions years 1997 to and including 2017. With a 2017 docket number. Sort of strange to petition a year that wasn’t then over for most individual taxpayers.

Anyway, JT never responds when IRS says they don’t have nothing, so Ch J L Paige (“Iron Fist”) Marvel tosses JT.

What’s going on?

What we all know cannot be told too often, said a much better writer than I. And we have another example today. Here’s Derrick Davidson and Angela Davidson, 2018 T. C. Memo. 38, filed 4/2/18.

It’s Derrick’s story, his and his loved-once Kelley’s. Was the court-ordered division of joint debt deductible alimony? It doesn’t take Judge Vasquez long to get to the point. AR law isn’t exactly straightforward, but debt allocations aren’t treated as alimony. The aim of alimony is to try to balance the moneyed spouse’s resources with the non-moneyed spouse’s needs, but Circuit Court Judge Joanna Taylor finds that Derrick’s income and resources are “…too speculative to set any kind of time frame on when his income would have to improve for it to inure to the benefit of the Plaintiff [Kelley], the issue of alimony will not be held open to allow Plaintiff [Kelley] to reopen this case and file a petition for alimony in the future.” 2018 T. C. Memo. 38, at p. 4.

Derrick is a lawyer. After fifty-one years at this, I can vouch for the fact that, for at least forty of those years, my income has been “too speculative to set any kind of time frame on when my income will improve.” And this year don’t look too much better. What we all know, part one.

Derrick and current spouse Angela took an alimony deduction for one-half of the joint liabilities Circuit Court Judge Joanna Taylor laid upon him. While Derrick and Kelley were jointly and severally liable for these, Circuit Court Judge Joanna Taylor laid them all on Derrick alone, and says Derrick can’t discharge them in bankruptcy. So maybe if loved-once Kelley died, Derrick could seek contribution from her estate, satisfying the Section 71(b)(1)(D) termination-at-death.

“In setting the amount of alimony, the Arkansas courts primarily consider the financial needs of one spouse and the other spouse’s ability to pay.  The Arkansas courts also consider, as secondary factors, the financial circumstances of both parties, the amount and nature of both current and anticipated income of both parties, the extent and nature of the resources and assets of each party, and the earning ability and capacity of both parties.” 2018 T. C. Memo. 38, at pp. 10-11. (Citations omitted).

AR law was apparently amended after the year at issue to provide that alimony terminates at death, which is nice after all the ambiguity I’ve blogged in the past, but Judge Vasquez finds this was a property settlement, not alimony.

OK, but unless we are AR lawyers specializing in family law, what do we all know?

Judge Vasquez will tell us, as he lets Derrick off from the accuracy chops.

Derrick told his CPA the whole story, and they reasonably relied on the non-discharged-in-bankruptcy language Circuit Judge Joanna Taylor put in her amended order.

Besides, “Petitioner is an attorney, but he does not practice tax law.  See Bursten v. United States, 395 F.2d 976, 981 (5th Cir. 1968) (‘We must note here, as a matter of judicial knowledge, most lawyers have only scant knowledge of the tax laws.’).” 2018 T. C. Memo. 38, at p. 167, footnote 8.

Maybe no penalty, but they can still practice in Tax Court. But we all know that.

With a deficiency thrown in.

I like the ingenious move. I prefer the successful one, naturally, but the unsuccessful, even if doomed from the start, may furnish grist for the blogger’s mill.

Here’s Bryan Douglas Wendt, et al, Docket No. 11366-17S, filed 3/30/18, an off-the-bench designated hitter from STJ Lewis (“Spelled Correctly”) Carluzzo.

Bryan and spouse have a descendant enrolled and in good standing at Texas Tech in the year at issue, and have paid therefor. The Red Raiders confirm said facts, and confirm that the younger Wendt hasn’t been busted for dope.

So Section 25A American Opportunity and Lifetime Learning credits are on the table.

But Bryan tries to stretch the solid single into a double, and gets thrown out.

Bryan also seeks the Section 222(a) deduction for the same amounts.

STJ Lew breaks the bad news. “…but section 222(c)(2) (A) expressly prohibits a deduction for tuition and fees if the taxpayer ‘elects to have section 25A apply with respect to such individual for such year.’” Transcript, at p. 6.

Bryan claims he didn’t elect.

“According to petitioners, the structure of section 25A, and the titles of the various credits allowable under that section, that is, the Hope Scholarship Credit, the Lifetime Learning Credit and the American Opportunity Tax Credit (AOTC), including the overlap of the AOTC with the Hope Scholarship Credit, see sec. 25A(i), make the statute difficult to apply and subject the statute to differing interpretations.” Transcript, at p. 7.

STJ Lew isn’t buying. “Suffice it to note that we do not share their view in this regard.” Transcript, at p. 7.

If Bryan didn’t elect Section 25A, how does he get the credit at all? On the hearing Bryan cited to no other law. And Bryan has an even bigger problem if he didn’t elect the credit, but is left with the deduction.

“Ironically and arguably, petitioners’ position could result in the disallowance of the education credit, which in turn would allow the deduction for tuition and fees, but result in a substantially larger deficiency. To respondent’s credit, respondent does not alternatively argue for that result.” Transcript, at p. 8.

If you put it on your return, you elected. So two claims will only get you one.

I’m a great fan of summary J; that’s summary judgment, or judgment without trial. See my blogpost “Summary Judgment – A Causerie,” 3/13/14.

But for the motion to work, that is, to dispose of the case altogether (in one’s favor, of course), or to smoke out one’s adversary and tie the adversary down as to facts and law, and, as a collateral benefit, find out what the judge thinks of your case, your case has to be ripe enough, that is, enough facts alleged and substantiated to warrant disposition, at least in part.

I doubt Rose M. Saustegui, Docket No. 20674-17, filed 3/30/18, knew she was moving for summary J when she filed her “MOTION TO DISMISS,” wherein she claims “…we have supplied the IRS with all documents and receipts they have requested. They have requested logging miles on my vehicle which were damaged due to hurricane.” Order, at p. 1.

Of course, a deficiency case can’t be dismissed otherwise than for want of jurisdiction without entry of decision in favor of IRS for the whole amount of the deficiency.

So STJ Daniel A. (“Yuda”) Guy treats Rose’s motion as one for summary J.

I’m sure my sophisticated readers have already spotted the easy response IRS made, rather like the cross-court overhead smash that follows a desperation lob.

IRS says, “No, you haven’t.”

Or rather, as STJ Yuda more elegantly puts it: “Respondent opposes petitioner’s motion and disputes her assertion that she has substantiated the expenses in dispute. Notably, petitioner has failed to show that she has provided respondent with all requested documents and receipts. Accordingly, drawing factual inferences against petitioner as the moving party, we conclude that petitioner has not shown that there are no material issues of fact in dispute at this juncture of the litigation with respect to whether she is entitled to the deductions and credits claimed on her… return and whether she is liable for the accuracy-related penalty under I.R.C. section 6662(a).” Order, at p. 2.

No summary J, but STJ Yuda has some advice for Rose.

“This case requires more evidentiary development. Evidence is received by the Court by means of the stipulation and trial process, not through pleadings such as the petition, answer, and any reply. See Rules 91 and 143, Tax Court Rules of Practice and Procedure. Petitioner is strongly encouraged to meet with respondent’s counsel, exchange documents, and attempt to settle the case or otherwise execute a stipulation of facts and prepare for a trial.” Order, at p. 2.

OK, but maybe after some argy-bargy with IRS, there can be a stipulation of agreed facts that doesn’t give away Rose’s case. And although piecemeal motions for summary J are much disfavored (see my blogpost “The Second Time Around – Part Deux,” 8/1/17), it just might could be that another motion for summary J does the job.

With the proper disclosure of the previous application for the relief sought therein, of course.

It’s my fault this blogpost is delayed. I once again acknowledge with gratitude the overwhelming hospitality of my brother and sister-in-law. Many thanks again, guys.

Returning from the elevated discussions of argute points of law by argute judges and practitioners, the gratifying comments of readers of this my blog, and the good fellowship everywhere manifest at Tango Charley Juliet, first I wish all participants thereat, and all my readers, the very best wishes for this holiday season.

Thanks to the friendly citizens of Chicago who directed my hapless footsteps between The Busiest Airport, the CTA, the Northwestern University Pritzker School of Law (and its genial faculty and staff members) and the hotel. And of course the Tax Court Judges and staff who worked so hard to make the Conference a great success.

Alas, now back to the daily grind.

Not much coming out of The Glasshouse today, except an example of total lack of jurisdiction too good to pass up.

Morei, Inc., Docket No. 13770-16, filed 3/29/18, gets sent off by ex-Ch J Michael B (“Iron Mike”) Thornton. Ex-Ch Judge Iron Mike has no need of a dictionary here, nor is any fine point of law anywhere to be found.

Morei’s petition was signed by a disbarred attorney. After he was disbarred. After he was disbarred for exchanging in a Facebook colloquy with a prospective client of the sort that drew the legendary response from an attorney at an ethics CLE, which gives me my title for this blogpost.

Morei had also had its corporate status revoked by its home State prior to the disbarred attorney filing the petition.

Ex-Ch J Iron Mike has clearly heard enough.

“For the reasons explained in respondent’s motion to dismiss, petitioner has not shown that any owner or officer of petitioner, or anyone acting on their behalf, asked Mr. [disbarred] to sign the petition on petitioner’s behalf. Moreover, petitioner has failed to show that under Rule 60(c) and Nev. Rev. Stat. § 78.175 petitioner had the capacity to commence this case.” Order, at pp. 1-2.(Name omitted, but read the 4/13/17 Memorandum Sur Order).