It was a truism from the most verdant of my salad days, that upon hearing those words, one should stand up, check equipment, hook up, stand in the jump door and jump. Yelling “Geronimo!” was optional; bailing out was not.

Judge Buch echoes this old chestnut today in Patricia Guzik, Docket No. 26364-16L, filed 3/13/18.

One paragraph from this designated hitter will suffice to prove, once again, the truth of the truism.

“Ms. Guzik had three different attorneys during the 14 or so months that the settlement officer conducted her hearing. At nearly every stage her attorneys requested extensions of time to complete necessary paperwork. Each time the settlement officer granted reasonable extensions. Even with all of those extensions, Ms. Guzik did not submit an installment agreement proposal. The settlement officer cannot be forced to propose a collection alternative for a taxpayer who refuses to do so.” Order, at p. 7.

Guess whom the petitioner will blame. No prize for the correct answer.

No, this is not a political blog. I’ve said again and again I do not set my toes in the political swamp; anyway, not here.

But The Great Dissenter, s/a/k/a The Great Concurrer, Master Silt-Stirrer and medalist in the Reverse Judicial Backflip event, Judge Mark V. Holmes, refuses to give evidentiary credence to extracts from The New York Times, Chicago Tribune, Los Angeles Times, Washington Post, Time magazine and Vanity Fair.

Moreover, Maltby Capital, Deutsche Bank, Enders Analysis and S&P Global fare no better. Even PricewaterhouseCoopers, that illustrious firm wherein toils that tax guru so dear to my heart, gets short shrift.

Here’s the latest episode of the long-running show starring the late King of Pop, Estate of Michael J. Jackson, Deceased, John G. Branca, Co-Executor and John McClain, Co-Executor, Docket No. 17152-13, filed 3/12/18, a designated hitter knocking off both the gems of journalism and a bunch of reports (largely anonymous) from distinguished opiners.

“This case was tried at a special session beginning on February 6, 2017, and the posttrial briefing runs into later this year. The parties filed their first stipulation of facts before trial. In it they expressly objected to some exhibits on hearsay grounds. They also reserved the right to object to any exhibit on relevancy and materiality grounds.” Order, at p. 1.

FRE 801(c) and 802 jettison the whole bunch.

“Newspaper and magazine articles are out-of-court statements by their authors and are therefore inadmissible hearsay if offered for the truth of the matters asserted. This is of course also true of articles on the internet. Statements that articles quote are double hearsay; for them to be admissible, a hearsay exception must apply both to the quoted statement and to the article itself, which is a statement by its author.” Order, at p. 2 (Citations omitted, but get them for your next memo of law).

Can’t cross-examine a piece of paper, much less a concatenation of electrons.

As for the financial savants proffered by the co-ex’rs, these are “…the financial prospects of either the music industry as a whole or of certain companies within it…. With the exception of the Deutsche Bank reports, it’s not clear who the actual human authors of the exhibits are. These reports are all out-of-court statements that are hearsay if offered for the truth of the matters asserted, and nothing in the record suggests that any hearsay exception applies.” Order, at p. 2.

If they’re in at all, they’re in only for the fact that someone said something, not that what they said is true or false. What use they are at that point is, of course, another story.

No, Legislative Backstab

He’s the original Mixmaster when it comes to stirring the silt, the gold medal-winning gymnast of the reverse judicial backflip; he writes like a human being, having broken his habit of dissing the partitive genitive, a feat only equaled by giving up smoking.

It’s Judge Mark V. Holmes, and today he goes hunting a rare ghoul from the Tax Court Graev, the record reopener to let in the Section 6751 Boss Hoss signoff for the Section 6651(f) nonfiling 75% fraud chop.

It’s Randy Jenkins, et al,, Docket No. 28712-11, filed 3/9/18.

Surely all y’all remember impecunious Randy and his als? What, you don’t? Then check out my blogpost “Psst – Y’Wanna Buy a Transcript Cheap?” 1/14/15. Randy is still at it. And so is IRS, moving after a mere 27 months post-trial, to wild card in the Boss Hoss for the Section 6651(f) nonfiling version of the 75% chop about to be laid upon Randy and the als.

Randy ripostes: “Mr. Gentry’s response (1) takes issue with another prior order that granted the Commissioner’s motion to amend his answer to conform his pleadings to the proof, (2) inexplicably denies the Commissioner’s explanation of I.R.C. § 6751(b), (3) argues, without any citations, that the Commissioner is ‘procedurally barred’ from reopening the case to correct any deficiency under I.R.C. § 6751(b), and (4) claims the District Court’s criminal-forfeiture order was excessive. He notably does not argue that the Commissioner made a mistake when he said in his motion that the Gentrys did not object. There just isn’t enough here for us to reconsider our order.” Order, at p. 1, footnote 1.

Rule 60(b) gives the menu for setting aside orders: “mistake, inadvertence, surprise, or excusable neglect; newly discovered evidence; fraud; or any other reason that justifies relief.” Order, at p. 2.

The key is whether letting in the Boss Hoss changes the outcome of the case. And thereby hangs the tale.

Another monument of unaging Congressional intellect is putting the 75% fraud chop in Section 6651, albeit near the tail of the procession, the overwhelming majority of which deals with electronically-calculated stuff and pure arithmetic. And then having Section 6751(b)(2)(A) knock out the Boss Hoss altogether for anything in Section 6651, including but without in any way, directly or by implication, construction, canon or rule, limiting (as my high-priced colleagues would say) the Section 6651(f) fraud chop.

Judge Holmes notes the obvious: “We can certainly imagine a scenario where the 75% maximum penalty of I.R.C. § 6651(f) might be used as a bargaining chip to extract a taxpayer concession — most taxpayers likely favor the 25% maximum penalty under I.R.C. § 6651(a) or, even better, no penalty at all. But the plain language of I.R.C. § 6751 is what it is, we have an opinion on point, and we will follow it here.” Order, at p. 3.

The “opinion on point” is Beam, 2017 T. C. Memo. 200, filed 10/10/17, which I didn’t blog because it was CDP where Beam was trying to contest liability but blew his chance to petition the SNODs. Judge Lauber dealt with the Section 6651(f) vs Section 6751(b)(2)(A) issue with a throwaway.

“The IRS in the notice of deficiency determined and assessed ‘additions to tax’ under sections 6651(a)(2) and (f) and 6654(a).  Section 6751(b) by its terms does not apply to ‘any addition to tax under section 6651, 6654, or 6655.’  Sec. 6751(b)(2)(A).  The SO therefore was not required to verify that the additions to tax assessed against petitioner had been approved by a supervisor.  See Mohamed v. Commissioner, T.C. Memo. 2013-255 (distinguishing the fraudulent failure-to-file addition to tax under section 6651(f) from a section 6663 civil fraud penalty).” 2013 T. C. Memo. 200, at p. 14.

OK, but in Mohamed (and, mea culpa, I didn’t blog that one either) Judge Halpern, no fan of fraudsters, let off Mohamed, an admittedly bad dude, on the Section 6651(f) but nailed him for Section 6663. And Judge Halpern waxed lyrical about the Rule of Lenity. “Nevertheless, notwithstanding that lack of universal approval, since section 6651(f) imposes an addition to tax (indeed, the addition to tax is described in the heading to subsection (f) as an ‘[i]ncrease in penalty’), any ambiguity in its application is resolved by the rule of lenity.” 2013 T. C. Memo. 200, at p. 25-26.

But Judge Holmes lets the IRS RO whack the non-filing taxpayer with the 75% chop to exact a settlement, with the Boss Hoss totally out of the play, even though the IRM pt. 4.23.9.4(2) (Mar. 27, 2017), quoted by Judge Holmes at p. 2 of the order, tells IRS to get the Boss Hoss signoff in a Section 6651(f).

So there’s no need for a reopener. The Boss Hoss doesn’t change the outcome for Randy and the als, because IRS don’t need no stinkin’ Section 6751 Boss Hoss signoff when Section 6651(f) is in play, notwithstanding the inherent unfairness of this bludgeon-wielding result.

This is an ambush. I should have weighed in before now, but this is still an ambush, however bad actors Randy and the als might be.

Edited to add: Of course, if IRS had gotten the Boss Hoss timely, it doesn’t help Randy and the als. If the outcome would change, all Judge Holmes has to do is let in the Boss Hoss, and Randy and the als lose anyway. But how prescient of IRS to get it two years before the IRM required it, and after Mohamed said they don’t need it.

Judge Wherry’s retirement back in January brought a wistful smile to many of us. Despite the shellacking he got from Judge Posner of 7 Cir, his good humor and archetypical judicial demeanor were much appreciated. See my blogpost “Goodbye to Whimsey,” 1/7/18.

But Mr. Rogers’ neighborhood (not that of the late and much-lamented Mr. Fred Rogers, rather the DADs of dodgemeister John E. Rogers), the source of Judge Posner’s ire, is without a judicial presence, so Jetstream, Warwick, Sugarloaf, and the rest wind up on Judge Goeke’s plate.

Good luck and good hunting.

No, this is definitely not a theological treatise; such exalted matters are far above my paygrade.

Rather, STJ Diana L. (“The Taxpayer’s Friend”) Leyden sends IRS off to trial, as she can’t figure out whether George Luniw, Docket No. 17789-16SL, filed 3/8/18, sent in one or three frivolous returns during his protracted epistolary rally with IRS.

George tried the “all zeros” plus Form 4852 dodge (to try to knock out the W-2s) for the year at issue. IRS gets partial summary J on Appeals’ denial of CNC, as George gave them no Form 433-A. His beef as to a NFTL gets bounced for lack of jurisdiction, as George’s Letter 12153 was five (count ’em, five) months late.

The 1040s were all for the same year, bore the same date, and manifested the same all-zeros frivolity. IRS put different date stamps on all, but the meanings thereof are obscure, says STJ Di.

George sent the return (or returns) in seriatim during the rally aforesaid, so IRS asked for three (count ‘em, three) Section 6702 $5K frivolity chops.

Nope, says STJ Di in this designated hitter.

So, is it one three times or three one time each?

Since settling up with IRS after the lackluster performance of their previous attorney (as to which see my blogpost “Straighten Up and Fly Right,” 8/8/13), Farrokh E. Pourmirzaie and Minoo S. Pourmirzaie, 2018 T. C. Memo. 26, filed 3/8/18 (a day of great significance in our house) are back again, this time with new counsel, but they don’t do a lot better.

Minoo is claiming Section 469(c)(7) real estate pro status, but her calendars of hours spent is the usual prepared-during-audit and her testimony doesn’t help her cause.

“Her husband, she testified, was a workaholic.  Nevertheless, she proposes that we find that she, herself, spent 15 to 20 hours a week at the San Jose property carrying out management tasks.  If we add to her suggested totals the 14 hours a week that her husband was at the San Jose property performing management tasks, then we have the couple spending 29 to 34 hours a week managing a four-unit residential apartment building at which they neither kept an office nor stored any tools. Simply stated, we do not believe it.” 2018 T. C. Memo. 26, at pp. 14-15.

Judge Halpern does a mix-and-match, and comes up with 416 hours for Minoo for each audit year, well short of the 750 cut.

And Judge Halpern hands Minoo a five-and-ten chop as well for substantial understatement.

A tough day for the bullpen.

I got a request from some online service, of which I had never heard, to provide “expert analysis.” The gist of my reply follows. I hope it explains this site.

I mostly cover US Tax Court. I don’t write “expert analysis.” I write tips and hacks for the in-the-trenches controversialists, and the preparers and advisers, who haven’t time to read law review articles. If I go over five hundred words in any blogpost, quoted matter included, I’ve failed. I take my text from Habakkuk 2:2: “Write the vision, and make it plain upon tables, that he may run that readeth it.”

If you want fast and simple, I’m your man. If you’re looking for law review, in the immortal words of Nobel Laureate Robert Alan Zimmerman, “it ain’t me, babe.”

Today the title of J. S. Bach’s cantata BWV 82 sums up the ongoing purge of non-motion requests for extensions of time carried out by That Obliging Jurist, Judge David Gustafson.

See my blogpost “Ya Gotta Move, Move, Move,” 2/27/18.

Since rock ‘n’ roll didn’t work, today Judge Gustafson goes for the classics in Broad River Holdings, LLC, Broad River CE Manager, LLC, Tax Matters Partner, Docket No.22635-15, filed 3/7/18.

It’s the same with the Broads as with Joe Earl York and the IRS. They’re trying, they really are, to schedule anything else they have to do, but they’re snagged on the SOL for the various Broad partners.

Judge Gustafson gave them two months to “get ‘er done” back in January. They did report on time, but their report asks for more time.

No, says Judge Gustafson.

“A request for the issuance of an order should ordinarily be stated in a motion. See Rule 50(a) (“An application to the Court for an order shall be by motion”). Following this procedure helps assure that a request is not overlooked. Parties should generally avoid putting requests for relief in documents that they file as status reports.

“Filing a motion not only simplifies the matter for the Court (enabling the immediate granting of a motion without the need for preparing an order) but also helps to assure that the Court does not overlook a request. Filing a request as a motion also helps to assure that the requesting party will comply with the requirements for motions. The parties’ request appears reasonable, but under Rule 50(a) it should have been presented by motion and not as an informal request in a status report.” Order, at p. 2.

At least both parties in this case agree that they need more time.

Of course, clever counsel use the status report to wildcard in all manner of stuff. See my blogpost “Chai, Chai, V’kayom,” 4/18/17. BTW, a docket search reveals that my colleague not only moved, he filed two amendments to the petition, and the parties are still jousting.

C’mon, guys, move.

I didn’t blog Timothy M. Dees, 148 T. C. 1*, when it came out 2/2/17, because I was more interested in the Battat recusal gambit (see my blogpost “Pay the Man – Part Deux,” 9/1/17), as that was obviously going to be the newest game in town.

Then too, I’d already discoursed and ranted extensively anent IRS’ now-you-see-it, now-you-don’t appearing and disappearing SNODs; see my blogpost “Should You Petition Everything?” 8/15/17.

But today, the plight of Cedric Ray Allen, 2018 T. C. Memo. 24, filed 3/6/18**, should wring a muffled sigh, at least, out of even the stoniest heart.

I’ll let Cedric tell the tale in his own words. “I am the petitioner in the within bona fide legal cause of action, am a poor indigent incarcerated prisoner, and have at risk threatened personal and/or property rights as a result of the within cause of action;

“THAT, declarant is a layperson, untrained in law, and as a result of poor, indigent, and incarcerated status is barred from access to the courts to protect personal and/or property right as guaranteed by due process abd [sic] equal protection clause of both the state and federal constitution….” 2018 T. C. Memo. 24, at p. 6.

It gets worse. Cedric was on KP for the years at issue. And he was on KP in the jailhouse kitchen.

Lemme tell y’all about KP, although not in the jailhouse kitchen.

From 4 a.m. until after 9 p.m., soaked in suds and dishwater, boots that had to be highly polished encrusted in grease, scrubbing endless squareheads and flattrays, barked at by every six-month National Guard PFC cook, berated by a mess sergeant with years of practice, unloading trucks in pouring rain… I’ll leave it that it was an enlightening experience. I will not make any political comments about those deferred.

Cedric got paid, and claims he should get $2500 back from IRS. Cedric wants his day in court, the prepayment sixty-buck ticket to justice.

Now IRS’ correspondence wasn’t of the best. Judge Buch charitably characterizes some of it as “confusing.”

But the bottom line is that all IRS did was not give Cedric a refund of his withholding, denied him his claimed EITC (which prisoners don’t get), and told him he owed no tax. They also asked him for information about his children, but he said he hadn’t any.

At the end of the day, IRS never determined that what Cedric showed on his return was less than what he owed.

And in a considerate footnote, Judge Buch lets Cedric out of a concession that would have destroyed his case. “Petitioner’s concession that he did not receive a notice of deficiency or notice of determination for 2008 or 2009 is also persuasive, but we do not hold his concession to be conclusive on its own, as petitioner was likely not fully cognizant of the decisive jurisdictional consequences of making such a concession.” 2018 T. C. Memo.24, at p. 12, footnote 11 (citation omitted).

Judge, when you come off KP you’re lucky if you know what day it is.

Cedric also got a Section 6702 chop, probably because of the EITC claim. However, that can only be considered at a CDP after a NFTL or NITL, and none thereof has yet issued.

Judge Buch suggests IRS could have been clearer, and made his life easier thereby. Read the correspondence cited by Judge Buch; between IRS’ bureaucratese, and Cedric’s prose, one could easily be befuddled.

Cedric wants counsel appointed, but that he only gets in a criminal case. Anyway, Cedric isn’t nearly as clueless as he lets on. “Petitioner’s filings reflect a fair amount of familiarity with the legal process–indeed, more than many of the pro se nonincarcerated litigants who appear before us.” 2018 T. C. 24, at p. 14, footnote 13.

Judge, you can learn a lot of law when you have a lot of time on your hands, a lot of motivation, and you’re not on KP.

*Timothy M Dees 148 TC 1 2 2 17

**Cedric Ray Allen 2018-24 3 6 18

Judge Mark V. Holmes claims Tax Court has gone back to Ancient Rome, but fortunately the gang at 400 Second Street, NW, is a lot “more collegial.”

To begin with, four years ago Judge Chiechi left in play the excess Roth IRA contributions of Celia Mazzei, 150 T. C. 7, filed 3/5/18. Income tax was off the table, due to SOL.

For the backstory, see my blogpost “Foolish Consistency – Redivivus,” 4/1/14.

Well, today ex-Ch J Michael B (“Iron Mike”) Thornton doesn’t need a dictionary chomp, because the tax benefits from Celia’s and famiglia’s Foreign Sales Corporation (a now-defunct export subsidy via Congressional largesse) are for income tax, not for the 6% overfunding Section 4973 hit.

The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, Master Silt-Stirrer and Suetonius Scholar, Judge Mark V. Holmes, says ex-Ch J Iron Mike ignores 6 Cir precedent (though Mazzei is 9 Cir bound), and acts like Caligula. 150 T. C. 7, at p. 77. If Congress carelessly gave away the ranch twice, it’s not Tax Court’s job to remedy same.

The FSC was properly set up, even if Celia and famiglia bought shares for a buck a pop and got better than half-a-million funneled into their Roth IRAs. Celia’s reliance on her CPA of 29 years’ standing was justified. But Celia and family controlled both the FSC and their own C Corp who paid the commissions to the FSC when, how, and in what amounts they wished.

While the FSC legislation made this OK, and exempted same from Section 482 reshuffling, that was for income tax, says the majority. And the majority does the usual form-over-substance. The only party with any economic risk was Celia and famiglia. They were on all asides of the deal, and while that may be OK for income tax purposes, it was too great stretch to cover Roth IRA funding limits.

The Great Dissenter says the majority could wreck many small corporations, capitalized for pennies, which later made millions. No, says ex-Ch J Iron Mike.

“The dissent’s hypothetical scenario would not involve a mismatch between substance and form.  At the initial point of capitalization, the fair market value and the substantive economic value would be identical and equal to the capital investment.  As the day-to-day operations commenced, that initial value would begin to change in concert with changing expectations regarding future cashflows.  The fair market value and the substantive economic value of the stock would remain identical, whether the business was a success or not.  Petitioners’ situation is different because at the moment of purchase petitioners’ formal characterization of the purchase did not match the underlying substantive and related-party economics.” 150 T. C. 7, at p. 66 (Footnote omitted).

I agree with ex-Ch J Iron Mike. Celia and famiglia were doing a double-dip, and the statute upon which they relied gave them only a single dip.

The Great Dissenter again went too far. See my blogpost so entitled, 2/11/13.