I remember with gratitude the enthralling lectures in trial tactics and evidence from James Wilson (“Hey, Bald Guy!”) McElhany, Esq., wherein the Bald Guy (and brilliant trial tactician) dissected the famous response “(T)he document speaks for itself” when counsel tried to read into the record a portion of a document already in evidence.

Sometimes that would shut counsel up. But not the Bald Guy.

No, said Prof McElhaney, the correct riposte is: ”Rule of Completeness; you read what you want into the record, and then I’ll read enough of the rest to put in context what y’all have cherrypicked.”

So here is the finale of Karen Spenningsby, Docket No. 13699-19, filed 7/6/17. For completeness.

Or, “Toto, I’ve a Feeling We’re Not in Kansas Anymore”

Perhaps someone at The Glasshouse at 400 Second Street, NW, in the Town L’Enfant Built, reads this blog. Peut être, as the late great Pierre Charles might have said.

Here’s Karen Spenningsby, Docket No. 13699-17, filed 7/6/17.

Karen and her trusty attorney Chris the K are back without even one day’s rest, as it would seem that my blogpost from yesterday, “Everything West of the Hudson is Kansas,” 7/5/17, awakened somebody.

Read for yourself.

We’ve all been there, when the facts are bad enough to bury your case right from the start. And today I’ve got sympathy for that hardworking lawyer who furnishes “honest tax representation at reasonable rates,” Eric William Johnson. He’s up against, among others John (“Scholar John”) Schmittdiel, Esq., star of my blogpost “Go To the Head of the Class,” 3/26/14.

Eric William’s client, Xibitmax, LLC, 2017 T. C. Memo. 133, filed 7/5/17, was a wee bit casual about filing Forms 941 for 10 quarters, and ponying up the money withheld from employees for FICA-FUTA-ITW.  These are non-assessables, so de novo review by Judge Nega. But that doesn’t help.

JP is Xibitmax’s sole shareholder and officer. Xibitmax makes trade show displays. JP spends much time on the road, so he hires an employee with no background in payroll taxes to do the Forms 941, and doesn’t look too closely when these don’t get filed or the withholding paid.

True, the economy tanks while this is going on, but Judge Nega isn’t interested. “[JP] testified that, on at least one occasion, he directed his employee not to remit–to ‘defer’–payment of petitioner’s employment and trust fund taxes.  This was done in early 2009 while petitioner was facing cashflow problems during a national economic recession.  Later that year, however, he instructed his employee to resume making timely payments on petitioner’s tax obligations, but the payments never resumed.

“During all periods at issue petitioner continued to withhold employment taxes from the paychecks of its employees and continued to pay its vendors and creditors.  Although he had access to, and would frequently review, petitioner’s only bank account, Mr. Powell never noticed, or chose to overlook, the fact that petitioner’s employment and trust fund tax payments were not being drawn from its account.” 2017 T. C. Memo. 133, at pp. 11-12.

It’s a tough case. Late filing and nonpaying chops sustained.

Older readers of the New Yorker magazine will remember Saul Steinberg’s immortal drawing of the New Yorker’s vision of America, where there was nothing between NYC and SF, except maybe Chicago and Kansas.

Well, even though she’s a native of the Old Line State, she’s still a Right Coaster, so Ch J L Paige (“Iron Fist”) Marvel can’t be bothered with those flyovers.

Here’s Karen Spenningsby, Docket No. 13699-17, filed 7/5/17, and her trusty attorney, whom I’ll hereinafter designate as “Chris the K.”

Chris the K hangs out in Fargo. Chris the K files a petition for Karen and asks for place of trial down the road in Bismarck.

But apparently Karen’s case is a nonstarter for small-claimer status, so Ch J Iron Fist suggests trial elsewhere.

Only she does it thus: “…the Court lodged a Request for Place of Trial which improperly seeks to Bismarck, North Dakota, as the requested place of trial in this case. The Court’s records reflect that this case is being conducted under the Court’s regular tax case procedures, and not the small tax case procedures. Only cases conducted under the Court’s small tax case procedures may be tried in Wichita, Kansas.” Order, at p. 1.

Wichita, Bismarck, who cares? Everything west of the Hudson is Kansas.

And so am I.

The hard-laboring clerks and flailing date-stampers at 400 Second Street, NW, in the homeplace of tomorrow’s birthday honoree, must already be on their way to the beach and barby, because the opinions that usually emerge at 3:30 EDT were up this morning before noon.

But it now falls to the hard-laboring blogger, here in The City That Never Sleeps, who has before him neither beach nor barbecue, to lay before the public the saga of RERI Holdings I, LLC, Jeff Blau, Tax Matters Partner, 149 T. C. 1, filed 7/3/17.

If somewhere in the dimmer recesses of the reader’s mind a faint tintinnabulation is heard, the reader is one sharp cookie. See my blogposts “Don’t Give a Sham,” 5/22/14, and “Don’t Give a Sham – Part Deux,” 8/11/14.

But today’s iteration of the charitable donee’s celebrated fight song “Hail to the Victors Valiant,” goes not to the chaps in yellow and blue, but to IRS, as Judge James S. (“Big Jim”) Halpern tells us in 69 pages.

You’ll remember that a remainder interest in realty that cost a hair less than $3 million gave rise to a $33 million charitable deduction, although the charitable donee, alma mater to both my mother and my nephew (but not in the same class), get way less than $33 million.

After plowing through nearly 20 pages contrasting and comparing dueling appraisals of the worth of the remainder interest transferred to the donee, Judge Big Jim goes off on the Form 8283, which does not state the cost basis of the interest donated in the hands of the donor.

RERI, the donor, claims substantial compliance.

No, says Judge Big Jim.

“The significant disparity between the claimed fair market value and the price RERI paid to acquire the SMI just 17 months before it assigned the SMI to the University, had it been disclosed, would have alerted respondent to a potential overvaluation of the SMI. Because RERI failed to provide sufficient information on its Form 8283 to permit respondent to evaluate its reported contribution, cf. Smith v. Commissioner, 2007 WL 4410771, at *19, we cannot excuse on substantial compliance grounds RERI’s omission from that form of its basis in the SMI. Therefore, RERI did not “[a]ttach a fully completed appraisal summary” to its 2003 return as required by section 1.170A- 13(c)(2)(i)(B), Income Tax Regs. Because RERI did not meet the substantiation requirements provided in section 1.170A-13(c)(2), Income Tax Regs., it is not entitled to any deduction under section 170 for its contribution of the SMI to the University. See sec. 170(a)(1); sec. 1.170A-13(c)(1), Income Tax Regs.” 149 T. C. 1, at pp. 26-28, footnotes omitted.

Since this is a petition from a FPAA, determination is made at entity level. So on with the 400% overvaluation chop.

But no chop if FMV of the donated interest cannot be proven, or proves to be under the radar for the overvaluation chop. The Section 7520 tables to be used for remainders fail to consider that the holder of the donated interest couldn’t sue for damages or to enforce the tenant for years to make good any damage, only evict the tenant for years. Thus inadequate protection for the remainder, throwing the Section 7520 tables off the table. Check out Reg, 1.7520-3(b)(1)(iii).

Follows the usual mix-and-match among appraisers, and whoever has burden of proof for enhanced chop, the evidence to prove good-faith reliance is the same. The words and deeds at time of donation are what they are.

And RERI relied on 18-month old numbers for FMV when it made the contribution. Not good enough for good-faith reliance.

IRS wins. Rule 155 beancount follows.

But individual partners may have an out. “Although the liability of a particular partner for the gross valuation misstatement penalty will depend on the arithmetic threshold provided in section 6662(e)(2), no partner will be able to avoid the penalty on the basis of the reasonable cause exception provided in section 6664(c).” 149 T. C. 1, at p. 69.

Frances L. Rogers, 2017 T.C. Memo. 130, filed 7/3/17, is no stranger to this blog, although she now appears as lead player.

More properly, she is Frances L. Rogers, Esq., member of the Chicago Bar Association, sporting the following credentials: “In 1963 she graduated with a bachelor’s degree in chemistry, and in 1965 she completed a master’s degree in biochemistry. In 1975 she completed a master’s degree in business administration (M.B.A.). In 1981 she earned a doctorate in educational administration. Petitioner attended law school, and in 1990 she completed her law degree. While attending law school she took classes in corporate and individual income tax. Petitioner has taken courses at her local community college. In 2011 and 2012 she completed multiple classes in tax and accounting, including income tax accounting, advance tax accounting, and principles of financial accounting.” 2017 T. C. Memo. 130, at pp. 2-3.

No, Frances isn’t putting out her c.v. to apply for a job as Trial Clerk in Tax Court. Rather, she is seeking Section 6015 innocent spousery from her trial counsel, spouse and well-credential master dodger John E. Rogers, whose career I and Judge Ruwe have pursued from Brazil to Seventh Circuit. There must be half-a-dozen of John’s peccadilloes that have featured in this my blog, and Frances was right by his side.

In fact, when John was ill back in 2009, Frances took over his law office and ran the whole show.

Now Judge Kerrigan has this one, and she has a lot more patience than I would have were I a Tax Court Judge (which Heaven forfend!).

This is a 90-day stand alone, which happens when there is no deficiency pending, collection has commenced, and ninety days has elapsed after the Form 8857 has gone in and IRS did nothing; they were probably still convulsed with mirth.

On the trial, Frances claims “…she did not meaningfully participate in the…deficiency case. She did not sign the court documents filed in the … deficiency case, and she testified that she had not looked at many of those documents. On her Form 8857 and in her testimony petitioner portrays herself as having a near complete lack of knowledge or sophistication with respect to business and financial matters. For example, she states that before 2009 she ‘was not capable of understanding a checking account or credit card statement’ and that she still ‘is unable to understand basic financial statements’.

“According to petitioner her husband ‘took care of everything’ regarding the family’s finances and made most or all financial decisions for her. She claims that she relied on him to handle tax and financial matters that affected the family, and she believed her reliance was appropriate given that he was a ‘tax professional * * * well respected by his colleagues and clients.’ Despite having an M.B.A. and a J.D. and having completed multiple courses in taxation petitioner contends that she has ‘no understanding’ of items and transactions reported on their joint returns, which were the subject of the … deficiency case. Petitioner testified that during the 2012 trial she ‘had no idea what was happening’. 2017 T. C. Memo. 130, at pp. 14-15.

I cannot comment on the foregoing without using language unfit for the chaste eyes of my readers, but the words “load of” and  “horse” play a role therein.

Judge Kerrigan, dainty as always: “Petitioner’s testimony about the extent of her ignorance is not credible.” 2017 T. C. Memo. 130, at p. 15.

She was independently wealthy before she married, ran her inherited real estate, ran her own real estate  brokerage, was associate principal of a high school with over 2,000 students, worked with her husband, never alleged abuse, was still married to him, and utterly failed to sustain her burden of proof.

If ever a case called for a Section 6673 chop to add to the family bill, this is the case.

The prelude to a bunch of papers in litigated cases gets transformed, as Judge Goeke unloads eight (count ‘em, eight) pages of undesignated order on this poor, hard-laboring blogger and Estate of Richard L. Marshall, Deceased, Patsy L. Marshall, Personal Representative, and Patsy L. Marshall, Transferees, et al., Docket No. 27241-11, filed 6/30/17, just as I was thinking of taking off for the three-day weekend. And I bet Patsy and the als aren’t best pleased either, although this is going to smart for them more than a wee bit.

This is the dénouement of a Section 6901 transferee case, as you’ll deduce from the caption. For an ultra-brief synopsis of the backstory, see my blogpost “Schooled and Unschooled,” 6/20/16.

The dust has settled, the Section 155 beancount is almost done, the lawyers are packing the lit bags, the accountants are shutting the adding machines and folding two miles of tape, when someone says “prenotice interest.”

That’s when the fight starts.

Transferee liability cases compute interest in two parts: first, no earlier than date of transfer up to, but not including, and not after, the date of notice of liability. Next, interest from notice to payment.

State law determines the prejudgment interest (in Tax Court “prenotice”), and here it’s OR. Judge Laro dealt with the TX version in my blogpost “Deep in the Heart of Texas – Part Deux,” 7/8/15.

Anyway, the long and short of it is that the start date for prejudgment interest depends upon knowing the amount due and the date when it became due. That the number is difficult to ascertain and may involve mathematical complexity doesn’t stop the start date if the debtor-taxpayer knew they owed something.

And here the date’s certain, when the Marshalls got the boodle from the mix-and-match Midco.

I’m not quoting Judge Goeke’s law review article here, so he can publish it afresh in the University of Oregon Law Review. After all, that illustrious institution describes itself thus: “(W)e don’t view law school as ruthless competition. We view it as a way to make a positive difference. We’re known for a friendly, supportive, and collaborative environment—and any of our students will tell you this.”

Makes me weep.

Howbeit, the Marshalls get mulcted for $8 million in prejudgment interest. And their shot at equitable recoupment, OR State law or anything else was shut down last June.

“Second, petitioners are not entitled to reductions in judgment based on Or. Rev. Stat. sec. 95.270(3), the doctrine of equitable recoupment, or any other offsets. In Estate of Marshall, we determined that petitioners were not entitled to any offsets, adjustments, or other reductions to the amount of their transferee liability under Or. Rev. Stat. sec. 95.270(5) because they had at least constructive knowledge that MAC’s tax liability would not be paid. Petitioners are now attempting to reduce their transferee liability by making the same arguments under Or. Rev. Stat. sec. 95.270(3) and the doctrine of equitable recoupment in their Rule 155 computations that they presented in their briefs.” Order, at p. 5.

The Marshalls knew the deal was a tax dodge, got the boodle, and moreover got the boodle with a premium of 60% over what anyone else would pay because they knew the Midco was going to walk on the tax liability.

OR statutes talks about “equities,” but the Marshalls have none. For equitable recoupment, use Section 1341, not a Rule 155 beancount. And the Marshalls got whatever credit to which they were entitled under equal access to justice for their fight with the Bureau of Reclamation; no more here.

Have a great weekend.

At odd intervals, I get correspondence from litigants and participants asking me to redact information that appeared in the orders, opinions and decisions I blog.  Section 7461 says everything is public unless the Court otherwise orders. Few be the exceptions.

So removing something from this blog removes nothing from public view; it’s still all on the internet via www.ustaxcourt.gov.

But there is a remedy for the shy, and Bradley Birkenfeld, Docket No. 9896-17W, filed 6/29/17, will show you shy people how it’s done.

Actually, it seems that his trusty attorney, to whom I’ll herein refer as DZ, has the right stuff.

Here’s Ch J L Paige (“Iron Fist”) Marvel to tell y’all all about it.

Pursuant to Rule 27(d), “petitioner’s Motion for Protective Order and To Seal Reference List…is granted in that petitioner’s State of residence and mailing address are sealed.” Order, at p. 1.

And there’s even a sixty-day out for an inadvertent lapse in Rule 27(h).

So, all shy people, bang out your Rule 27 motion to seal, and ship it in with your petition, place of trial and check for the sixty bucks. And tell ‘em Brad and DZ sent you.

Though Judge James S. (“Big Jim”) Halpern hides this whistleblower’s name for thirty days so s/he can take an interlocutory appeal from this order, s/he’d better move fast, or Judge Big Jim will spill the clichés all over the lot.

Here’s 148 T. C. 25, filed 6/28/17, the story of presently anonymous Whistleblower 14377-16W (hereinafter “716 Whiskey”). And the interlocutory appeal from unveiling caselaw is found at 148 T. C. 25, at p. 3, footnote 2.

716 Whiskey is a registered investment adviser. When not working with spouse in spouse’s registered investment advisory business, 716 Whiskey overhauls EDGAR for corporate skullduggery, and has 11 cases before Tax Court petitioning the Ogden Sunseteers’ shoot-downs of his/her blows.

Judge Big Jim is a wee bit skeptical of 716 Whiskey and others of his/her ilk. It came out in a phone-a-thon that “(T)he 11 cases involve in excess of two dozen taxpayers, and all appear to have resulted not from petitioner’s employment by, or other close relationship to, the target taxpayer but from his examination of publicly available materials, such as Securities and Exchange Commission (SEC) Forms 10-K.  We informed petitioner that the public has an interest in knowing the identity of persons using the courts, and that, in deciding motions to proceed anonymously, the Court must resolve the competing societal interests at stake.” 148 T. C. 25, at p. 4. (Emphasis by the Court).

So Judge Big Jim asks 716 Whiskey to dish why he’s afeart of going public. But neither life nor limb is at stake, unlike some other blowers catalogued by Judge Big Jim and whose stories I have blogged. 716 Whiskey neither works for nor has any relationship with the blown, can’t identify any clients of self or spouse who might walk away, or political figures who might retaliate against 716 Whiskey or spouse. 716 Whiskey gave up a CPA license and keeps only the Series 65 wherewith to advise.

Nevertheless, Judge Big Jim might be willing to give 716 Whiskey the benefit of the doubt.

Except.

716 Whiskey seems to be a Serial Blower.

“He has so far brought 11 whistleblower cases in the Tax Court.  He has in his supporting papers identified 21 numbered whistleblower claims (whistleblower claims with a separate processing number assigned by the IRS), and he has in those papers identified by name 26 taxpayers and included by reference (without naming them) 24 more.  He also has pending before respondent four ‘submissions’ (involving, it appears, six numbered whistleblower claims and six taxpayers).  He also admits that he has before respondent 51 numbered claims supplemental to claims in cases already before the Court.  Each of those as-yet-unresolved supplemental claims is potentially the source of another adverse determination and a resulting petition to the Court.  Petitioner’s recourse to publicly available materials to identify supposed tax abuses imposes no natural limit other than his own industriousness on the number of cases he could bring.  His lack of an employment or other close relationship to the taxpayers he identifies suggests that he has no familiarity with a taxpayer’s basis or rationale for taking what petitioner considers an abusive position.  For those reasons, serial claimants of whistleblower awards may disproportionately burden the Court with petitions only superficially meritorious.” 148 T. C. 25, at pp. 13-14. (Footnotes omitted).

The public has a right to know who’s flooding the zone.

Judge Big Jim is also aware that when a Swiss swindler hit a $104 million jackpot whistling from the slammer, a “cottage industry” sprang up.

“Apparently, a cottage industry has sprung up involving mining publicly available documents for the chance to claim a bounty from the IRS. Unless we identify serial filers by name, the public will be unable to judge accurately the extent to which the serial filer phenomenon has affected the work of the Tax Court because the public would not know whether any particular petitioner of an adverse whistleblower determination had filed petitions appealing other adverse whistleblower determinations.” 148 T. C. 25, at p. 15. (footnote omitted).

Now I’m prepared to wager a few bobs that the public couldn’t care less. But I’ll bet the Ogden Sunseteers and the battalion of letter-writers appurtenant thereto, and Tax Court Judges who have to deal with this, care a lot.

And there is no Section 6673 chop for bringing Section 7623s, even if public info is grounds for an immediate toss. Anyway, 716 Whiskey admits all this info is public.

Blowers get special handling if anonymous. “for example, the record is sealed temporarily, the normal procedures for electronic filing and electronic service cannot at this time be used, the case must be assigned to a judicial officer earlier than normal in order to address the motion, and, in some cases, trials and hearing may need to be closed to the public to protect the whistleblower’s anonymity.  The public may wish to know the extent to which petitioners with numerous whistleblower claims require such special handling.” 148 T. C. 25, at pp. 15-16. (Footnote omitted). See my comment supra, as my high-priced colleagues say, concerning public interest.

So if you want to go for the boodle, blower, be prepared to get your name in the papers and in the blogosphere. Along with everybody else who shows up in Tax Court, even those who are shy.

Now lest anyone suppose I’m anti-blower, read my blogposts about the cases Judge Big Jim cites. And remember Harry M. (“The Mark”) Markopolos, who blew the doors on Bernie Madoff years before the SEC awoke to the massive swindle. Harry The Mark was systematically ignored and belittled as a nut, until long after the stable door was unbolted and Bernie Madoff made off with a cavalry division.

But this looks like those prisoner EITCs. See my blogpost “Oversoon,” 4/26/17. So it takes a full-dress T. C. to take them down.