I’m standing Lord Byron on his head for this one. Here’s Errict Rhett Foundation, Docket No. 16044-16X, filed 2/13/18, x-rated because it’s a Section 7428 revocation of a Section 501 freebie.

IRS moved for Rule 122 on-the-papers. IRS stated in the motion that Errict Rhett didn’t object. Nevertheless, CSTJ Lewis (“Properly Spelled”) Carluzzo, modestly signing himself as simple STJ, asked Errict Rhett back last November to object.

Again, Errict Rhett stood mute.

CSTJ Lew is still leery about letting this go on IRS’ papers alone.

“…we are reluctant to proceed as though respondent’s motion should be considered jointly made. Consequently, submission of the case pursuant to Rule 122 is not appropriate. In the absence of cooperation between the parties, the case can be submitted as contemplated in Rule 212 or 217(b).” Order, at p. 1.

I don’t fault IRS’ counsel for taking Errict Rhett’s consent and silence as consent.

Or, Win Your Case But Instruct Your Adversary

It used to be a truism so often repeated: “No one ever wins a DADs.” That’s the distressed asset – distressed debt dodge, where a portfolio of waste paper is married to a boatload of cash (the tax on which is sought to be dodged) by means of a tiered-LLC spiderweb. When the web is split, the loss is recognized but the gain isn’t, until the FPAA descends, and the sham meets its righteous doom.

The downside is that, by winning, you give your adversary a blueprint for a different result on a new day. Especially when your adversary is a top-class dodgeflogger like Chenery Associates.

So today it’s a different story.

Judge James S. (“Big Jim”) Halpern isn’t convinced IRS has established that Peking Investment Fund LLC, Peking Investment Holdings LLC, Tax Matters Partner, Docket No. 12772-09, filed 2/13/18 is a sham like Mr. Rogers’ celebrated Superior-Jetstream deals I’ve blogged so often. At least, IRS hasn’t convinced Judge Big Jim enough to grant summary J.

“Because the validity of each of respondent’s two arguments in support of justifying the FPAA’s disallowance of the loss in issue turns on disputed questions of material fact, we will deny respondent’s motion.” Order, at p. 2.

First, IRS hasn’t established that the Chenery-promoted partnership wasn’t truly a partnership. There was some collection activity, enough to get above the “feeble” range. The operating partner did bring in some yuan.

“Even if the generation of tax losses is the primary purpose for a partnership’s formation, the partnership may also have as a secondary purpose the conduct of a business enterprise. To prevail in disregarding a DAD partnership as a sham…, the Commissioner must establish that carrying out a business of collecting [non-performing loans] was so minimal a factor in the decision to form the partnership that it can be dismissed. In prior cases in which this Court and others have disregarded DAD partnerships as shams, the evidence showed that the partners ultimately had no real interest in collecting the NPLs.” Order, at p. 6.

Besides, in this deal the “investor” could swap out of one portfolio of bum paper for another if unhappy with the result. IRS hasn’t proved that if they did swap, they’d be protected against loss. All IRS has is Chenery correspondence from other deals promising no economic loss. Noscitur a sociis doesn’t get it.

That a pivot-man partner only had a 1% in the LLC doesn’t mean it was insubstantial. There is no such rule. And there was an independent valuation of the worth of the loan portfolio (hurried because it was year-end), so there was concern about making money.

Of course, on the trial the Peking ducks will have the burden of proof. But on summary J, they get the benefit of every inference (and Judge Big Jim can infer with the best of them).

There’s the interesting question of a Section 482 mix-and-match between two offshore tax-indifferents. Two District Courts have split on this; one of them was affirmed on other grounds by 5 Cir, but Judge Big Jim doesn’t have to go there, because IRS hasn’t shown the two were under common control.

You really have to read the whole order. It’s a blueprint for sliding your DAD dodge in under the tag.

It does prove that you can get tired of winning (in a non-political sense, of course); so tired, in fact, that you think you can cut corners in your summary J motion and get a win anyway.

A Taishoff “good job” to J. E. Williams, Esq., for petitioner.

No, I didn’t misspell the international radiotelephone declaration of a non-life-threatening emergency. But it is a declaration that will have consequences for Panagiota Pam Sotiropoulos, Docket No. 19884-12, filed 2/12/18.

Judge Lauber finally gets around to tossing Pam’s petition for want of jurisdiction, because Section 905(c) backs up IRS’ contention that they “don’t need no stinkin’ SNOD” to hit Pam for the tax refund she got from HMRC (that’s Queen Elizabeth II’s revenooers), even if it later turns out Pam was not entitled to same and she paid the UK income tax for which she took credit long ago.

See my blogpost “Give It Back, Take It Back,” 5/1/17, and my blogpost therein cited, for Pam’s joust with UK and US.

So Pam’s petition is dismissed for want of jurisdiction.

But I’ll repeat my comment from last May: did she have a chance to contest? All Tax Court decided was (a) they could see if they had jurisdiction, and (b) they didn’t. Maybe I’ll get a blogpost out of a CDP, if Pam seeks one.

And Go to the End of the Line?

It’s in my nature to look for litigation tactics and stratagems, even where, perhaps, the principals and their attorneys themselves were unaware of, and did not intend to employ, the tactic or stratagem.

So I do not impute to Mary B. Doggett, Docket No. 11434-17S, filed 2/12/18, nor to Jock H. Doggett & Jane M. Doggett, Docket No. 11412-17S, filed 2/12/18, nor yet to their attorney, whom I’ll designate hereinafter as “Mike,” any crafty motive.

It may be that the stricter regular rules of procedure give more scope to the petitioners. It may be that the right of appeal, unavailable in a small-claimer, has strategic value. It may be that there is some advantage that Mike has found, and I have missed. Omniscience is definitely not in my line.

But with trial date approaching, and continuance sought, buying time by way of dropping your “S” gets you away from the STJs, at least for the moment (and perhaps permanently). And sends you back to the general docket. And you didn’t use up a continuance.

Thanks, Mike. Even if I got it totally wrong.

A precept from my long-ago apprenticeship days popped into my mind; don’t make the judge guess, or speculate. Tell your client’s story as plainly as you can. That wisdom seemed apposite as I read Judge Morrison’s advice to Carolyn D. Young, Docket No. 9613-17, filed 2/9/18.

Carolyn D. got a SNOD challenging her HOH filing and the personal exemption she claimed for one Jim Smith, for whom no other information is furnished. Carolyn D. petitioned the SNOD timely, but leaves out some important stuff.

Judge Morrison: “…according to respondent [IRS], the petition challenges the federal government’s use of the petitioner’s 2015 tax refund to offset an education loan owed by her to the Department of Education. This last issue, respondent contends, is outside the jurisdiction of the Tax Court.” Order, at p. 1.

So IRS moves per Rule 34 to dismiss for failure to state a claim.

But Carolyn D. will get a shot at a course correction.

“Petitioner should be given the opportunity to file an amended petition to clarify whether she challenges the notice of deficiency’s determinations regarding head-of-household filing status and the personal exemption for Jim Smith. Petitioner should also have the opportunity to explain why the Tax Court has jurisdiction to resolve the educational-loan offset issue.” Order, at p. 1.

I’d be glad to know why Section 6402(g) doesn’t knock out all education loan offset challenges. The only work-around I know of is the Chapter 13 gambit in United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010).

But I’m always glad to learn.

In the unlikely event anybody is interested, I took a pass on today’s designated hitters. One was a Graev-reopener (enough already), one was an unsubstantiated everything, and one was a hardscrabble farmer’s third attempt to overturn a decision five years after it became final, and after 9 Cir. had tossed his appeals (twice). Sisyphean endeavors rarely end well…at least, in Tax Court.

Peter Edward Schaller & Catherine Joanne Schaller, Docket No. 7318-17, filed 2/8/17, looks like a simple unreported income story, but something jogged my memory. So while The Judge With a Heart, STJ Rob’t. N. Armen, hits P.E. for $1K in tax, maybe P. E. had something going for him that never turns up in the record.

P.E. claims he worked for the City of Sioux City, IA. The Sioux City crew didn’t withhold FICA/FUTA/ITW, nor did the Unemployment Insurance types, although P. E. claims he berated them, visited their offices, and otherwise demanded that “…Sioux City Finance Office and lowa Workforce Development Civil Service Employees shall bear full responsibility, both fiduciary and pecuniary accountiability [sic] and responsibility for their failure to do the jobs that they are getting paid to do!” Order, at p. 2.

P.E. did get a total of $10K from the City and UI, which he didn’t report.

OK, we know that if an employer withholds but doesn’t remit, the employee is off the hook, per Section 31(a). But if an employer doesn’t withhold, the employee is stuck.

But stuck for what? STJ Armen doesn’t tell us how IRS got wind of the Sioux City and UI cash, but I’ll bet it was because both of those dudes filed 1099s.

Now here’s the kicker. See my blogpost “Catch Me If You Can,” 1/4/12. The employee in that case got a check from an outfit he never worked for, in payment of wages owed him from his real employer, and got a 1099-MISC Non-Employee Compensation therefor.

Judge Cohen gave that employee the benefit of the 92.35% reduction for the SE, and the 50% of SE exclusion from AGI.

I know the Sum. Op. I blogged was a small-claimer and not precedent for anything. And it is possible that Sioux City filed a W-2 showing no withholding, whether because P. E. claimed he’d owed no tax the year before or for the year at issue, or otherwise. So without more facts, I’m just speculating.

But maybe so P. E. has a claim for SE treatment as to Sioux City.

I chronicle the latest efforts by The Great Dissenter/Concurrer, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a Master Silt Stirrer and Old China Hand, Judge Mark V. Holmes, to propound an exit strategy from the long-running debate about the virginity (or otherwise) of certain islanders.

Or as a much more exalted personage has put it, “Be still, ye inhabitants of the isle.”

First up, Gail Vento, et al., Docket No. 23527-08, filed 2/8/18. Y’all will doubtless remember the wanderings of la famille Vento from Vegas to the Virgin Islands, from Tax Court to 3 Cir and back. If not, just Google them and me, and I doubt not the whole saga will pop.

Now la famille Vento, or such of them as missed the 3 Cir cut for unguided Congressional largesse, are still scuffling with IRS. Latest gambit is invocation of an authority not quite so exalted as that hereinabove referred to. This is the competent authority.

“…petitioners filed a request for an answer to the question of their Virgin Island residency with the so-called ‘competent authority’ — an office within the IRS whose agents can meet with their counterparts in the VI BIR to try to settle this issue. That has not worked out, but the Court’s recent opinion in Coffey v. Commissioner may provide a different escape hatch.” Order, at p. 1.

Judge Holmes wants out.

So Judge Holmes held a phoneathon.  IRS and la famille should report. Judge Holmes suggests that la famille drop the competent authorities, go to trial, or better yet, see if the cover-over papers VIBIR sent to IRS sets up the same SOL out as bailed out Coffey.  For those who missed the scoop on Coffey, see my blogpost “Another Non-Virgin,” 1/30/18.

But wait, there’s more, as the midnight telepitchers say.

Thomas Pfeil, 18251-13, filed 2/8/18, and Brad Camrud, 22732-13, filed 2/8/18, have the same idea, and IRS, no doubt with a sense of fatigue, is down with this.

Let’s have a Coffey break.

“…the Court spoke with the parties in this case to discuss how to move it forward. They reasonably proposed taking two months to confer to see whether the cover-over documents central to at least one opinion in Coffey exist in this case in some form, and to see if there will be any post-decision motions in Coffey that might affect all the cases that are similar to it.” Camrud order, at p. 1.

So take a couple months, guys. Just make it all go away.

I promised y’all Judge David Gustafson’s checklist for those litigants facing a Graev reopener. If you’ve been following this my blog at all, you know that IRS has been dredging up Section 6751(b) Boss Hoss signoffs on chops in cases long since tried, ever since 2 Cir agreed with Judge Gustafson that the Boss Hoss must precede the chop-laden SNOD.

There’s a daily stream of orders reopening records and giving petitioners a chance to call foul, and I suspect we’ll see even more, as the “sleepers wake.”

Well, today it’s the turn of Abdul M. Muhammad, Docket No. 23891-15, filed 2/7/18, to bukh about the pain and strain that will descend upon him if a late-proffered “Penalty Approval Form” gets wild-carded in.

Judge Gustafson, obliging as ever, hands Ab, by way of a designated hitter,  a handy-dandy guide to repelling boarders.

“Mr. Muhammad shall file a response to the Commissioner’s motion to reopen the record, stating whether he disputes the authenticity of the ‘Penalty Approval Form’ or otherwise objects to the Commissioner’s motion. If he does object, then he shall explain why. He shall also explain, in the event the Court were to overrule his objection and reopen the record to receive evidence on the subject of supervisory approval of the penalty, (1) whether and how the granting of the Commissioner’s motion would prejudice him, (2) what remedy would be required to cure or mitigate that prejudice, and (3) whether there is any evidence that Mr. Muhammad would wish to offer into evidence (or would wish to attempt to obtain) or whether there is any witness whom he would wish to examine (and, if so, what testimony he would hope to evoke from that witness).” Order, at pp. 1-2.

Take a close look at that form, Ab; sometimes the forms the IRS wants to wildcard in are trifle ex post facto. By way of analogy, see my blogpost “Going to the Mat,” 1/24/18.

Old men are loquacious. I plead guilty. I tell war stories with the best of them; wear my sober pinstripes, white button-down oxfords and striped repp neckties like Old Grayback from Wayback; and at Bar Association functions glaze over the eyes of those hard-working attorneys young enough to be my grandchildren with my “when I was your age” natterings.

Well today The Great Dissenter/Concurrer, a/k/a The Judge Who Writes Like a Human Being, Master Silt Stirrer and Old China Hand, Judge Mark V. Holmes, does what in my young day half-a-century ago was called “resettling an order.”

Check out my blogpost “Settle Order on Notice,” 6/23/17.

Now when the State court judge had finally churned out the “order, judgment and decree,” at more or less rare intervals some party would claim the judge got it wrong. Rather than serving notice of entry and filing an immediate appeal, a motion to resettle the order would follow, replete with “sober reasoning and copious citation of precedent” (but sometimes including rich helpings of what the other side called “Bravo Sierra”).

Judge Holmes has his chance to resettle today.

Here’s Judith S. Coffey, Petitioner & The Government Of The United States Virgin Islands, Intervenor, Docket No. 4720-10, filed 2/7/18.

Last week Judge Holmes ended this long-running saga by calling IRS out-of-time. See my blogpost “Another Non-Virgin,” 1/30/18. He did it by finding no jurisdiction, as the SOL had run.

“The parties spoke with the Court on January 31, 2018 and it was suggested that the order be amended to state the effect of this dismissal which, by operation of IRC § 7459(e), is that no deficiency is due. This is technically a request to revise a decision….” Order, at p. 1.

Motion to resettle order granted.

It’s a slow day at the Glasshouse. That Obliging Jurist, Judge David Gustafson, has a designated hitter checklist for those litigants responding to a Graev reopening, and various judges are swallowing Judge Holmes’ Coffey decision (which he has revised in light of commentary from the litigants therein; “Settle Order on Notice,” anyone?) dealing with the wise Virgins (Islanders).

But Ch J L Paige (“Iron Fist”) Marvel is following precedent and allowing the parties to stip jurisdiction (despite Judge David Gustafson dissent in Pearson, as to which see my blogpost “Does Not the Wild Boar Break Cover Just as You’re Lighting a Weed?” 11/30/17) .

Here’s Frieda G. Oliner Irrevocable Trust, Marian Cohen, Trustee, Docket No. 12766-15, filed 2/7/18.

Marian and IRS agree that the envelope that reached the Glasshouse on the fourth day after the 90-day cutoff contained the petition, and showed a private postage meter mark of the last day of the 90 days. The four days apparently satisfied IRS that the envelope reached the Glasshouse, and the flailing date stampers and hard-laboring intake clerks who toil therein, in the usual time.

So Pearson? Yes, but.

“…because that petition arrived within the ordinary mailing time for an envelope properly addressed and sent by first class mail and bearing a timely U.S. Postal Service postmark date, the timely mailing/timely filing provisions of section 7502 apply.” Order, at p. 1.

So we are back to “as good as.” If the private frank, be it generated by private postage meter, stamps.com or whatever, gets the petition to the Glasshouse in the same time as it would have gotten there had the USPS clerk hand-cancelled their own self, it’s good enough.

Judges Gustafson and Holmes will get their own posts seriatim, as my already-on-their-second-18-yr-old-Macallan colleagues would say.