Judge Paris steers her footsteps into those of Jerry Lieber and Mike Stoller, as she echoes their 1957 hit, in the endless Tax Court search for jurisdiction.

Today, Judge Paris breaks new ground in Corbin A. McNeill and Dorice S. McNeill, 148 T. C. 23, filed 6/19/17.

Corb and Dori started a case in USDCDCT when engaged in a fistfight over a shelter they unwisely espoused, but after IRS hit them with a NFTL, which Corb and Dori petitioned after Appeals tells them they can’t contest the chops, Corb and Dori dismiss the USDC case with prejudice, with the FPAA which gave rise to the deficiency admitted but the Section 6662 accuracy chops never considered.

Corb and Dori already paid the deficiency to get to USDCDCT, so all that remains are chops.

Judge Paris bifurcates the case. All that’s on the table here is jurisdiction; the actual liability for the chops is for another day.

“At issue is whether, notwithstanding the specific jurisdictional provisions of TEFRA, the general jurisdictional provision of section 6330(d)(1) provides the Court with jurisdiction to review this case.” 148 T. C. 23, at p. 7 (Footnote omitted, but it says IRS concedes Corb and Dori never got a chance to fight the chops).

Prior to 2006, if there was no deficiency, chops were off the table in Tax Court after a CDP. The chopped had to go to USDC. But Congress amended Section 6330(d)(1) to provide that any petition from a NOD was fair game at 400 Second Street, NW.

Of course, if prior chance to contest, game over.

Nonetheless, “Congress created the CDP process to provide taxpayers who are confronted with a lien filing or a proposed levy the opportunity to contest that collection action before the Internal Revenue Service proceeds to collect the outstanding tax liability. It follows that when Congress amended section 6330 in 2006–making the Tax Court the exclusive venue for review of CDP cases–its intent was not to preclude from review certain issues not subject to the Tax Court’s deficiency jurisdiction. With respect to petitioners’ section 6662(a) accuracy-related penalty, this penalty is another example of an item not subject to the Court’s deficiency jurisdiction under section 6221 but nonetheless reviewable by the Court in the context of its section 6330 jurisdiction.” 148 T. C. 23, at pp. 13-14. (Citations omitted).

Corb and Dori, stand by. There’s another opinion coming, that will determine your penalty.

No, this is not a newly-discovered manuscript by John Ronald Ruel Tolkien, coming soon to a theatre near you. No elves, dwarves or hobbits today, only another scenic easement case with some very sketchy arguments from IRS in pursuit of summary J.

Judge Morrison isn’t having it.

Here’s ORC Partners, LLC, Five Rivers Conservation Group, LLC, Tax Matters Partner, Docket No. 1041-16, filed 6/16/17, a designated hitter.

We’re dealing with GA law, as State law determines property rights, while Federal law governs the taxation thereof.

IRS wants summary J knocking out the ORCs’ $5,570,000 claimed Section 170(h) deduction.

First, IRS claims that, although the donee of the easement is a genuine 501(c)(3), the easement merges with the fee if both the dominant tenant and the fee owner are one and the same under GA law. Although the easement instrument provides for no such merger unless waiver of that provision is expressly stated, IRS claims the mere fact that such statement is necessary proves that the chance of such a merger of interests is not so remote as to be negligible.

Back to the Graev gambit yet again, so-remote-as-to-be-negligible variation. It’s the same idea getting a workout.

And the ORCs could buy out the 501(c)(3), or vice versa.

“Second, the IRS contends that the easement can be amended in such a way that one of the conservation purposes that the easement purports to serve could be harmed. Paragraph 20 of the easement allows the easement to be amended upon the consent of both parties if the amendment ‘would be appropriate to promote the Purposes of the Easement’, the amendment is ‘in accordance with the Policies’ of the [501(c)(3)], the amendment is approved by the Georgia Department of Natural Resources, and the amendment is ‘consistent with the Purposes of the Easement and the aggregate Conservation Values.’ Under section 1.170A-14(e)(2), Income Tax Regs., a conservation easement that would accomplish one of its enumerated conservation purposes but that would permit the destruction of other significant conservation interests is not exclusively for conservation purposes.” Order, at pp. 3-4.

First, it is a question of fact whether the possibility of merger of the easement and the fee is so remote as to be negligible.

Second, it is a question of fact whether the policies of the 501(c)(3) “… would cause it not to agree to an amendment that would harm one of the purported conservation purposes of the easement. The IRS does not deny that the [501(c)(3)]’s policies are relevant to the question of whether it would approve a harmful amendment. The question therefore is whether ORCs has shown that there is a genuine dispute about the [501(c)(3)]’s policies. We conclude it has raised a genuine dispute.” Order, at p. 5.

Given the brusque dismissal of IRS’ summary J claims, it might be a good idea for IRS not to try this move again.

It’s been fifty years and more since I first heard that phrase, on The Hill Far Above, when I first encountered the recording statutes of Our Fair State, from the now-long-departed Chief Whistler William Hirsch Farnham. No, Willie was a different kind of whistler than is found gazing at the Ogden sunset.

Enough nostalgia.

Briefly, if you want to protect your grantee’s interest in a conveyance or encumbrance, you must record the conveyance or encumbrance with the proper official before the grantor-encumbrancer unloads the property to that innocent purchaser for value without notice.

Merely taking possession of a written conveyance (deed, declaration) or encumbrance (mortgage, judgment, lien) means nothing unless you take it down, pay the fees, and get it recorded.

Ex-Ch J Michael B (“Iron Mike”) Thornton plows through our Real Property Law and a bunch of New York cases to prove this point. Ten Twenty Six Investors, Douglas Oliver, Tax Matters Partner, 2017 T. C. Memo. 115, filed 6/15/17, gets all kinds of technical, claiming that New York’s Environmental Conservation Law, which addresses architectural easements (yes, it’s another Section 170 “joy forever”), doesn’t apply, and, dragging arguments from the Graev, claim “so remote as to be negligible” that they would sell their historic warehouse before the National Architectural Trust got down to the thirteenth floor of 66 John Street, around the corner from where I sit typing this, with documents and fees in hand.

I’ve blogged the Graev case extensively. But see my blogpost “Back from the Graev,” 2/19/15, for this specific gambit.

Doesn’t fly.

An architectural easement is what we dirt lawyers call an “easement in gross.” That is, one not connected to adjoining property. For example, my right to drive over your driveway if we live next door to each other is an “easement appurtenant,” that is, part of my right in my land, which I can pass on to anyone else who gets title to my land. An easement in favor of a 501(c)(3), which doesn’t own any land anywhere, over your building is an easement in gross, and not enforceable at common law in Our Fair State.

Of course there are exceptions, and the recording statute, among others, bails out the grossers. Our Environmental Conservation Law does, but Ten Twenty Six is loudly protesting their easement wasn’t created under that law, because then their easement would require recording to be effective.

It was recorded. Only in the wrong year; not the year Ten Twenty Six claimed the $11 million tax writeoff.

So? says Ten Twenty Six. We wouldn’t sell or encumber until National Architectural Trust got around to recording the easement.

Mox nix, says Judge Iron Mike.

“Under N.Y. Real Prop. Law sec. 291 (McKinney 2006), a purchaser of real property who pays value for the property and does not have notice of an unrecorded interest in the property when the property is purchased will take the property free of that unrecorded interest, provided that the purchaser’s interest is recorded before the unrecorded interest is recorded.   Therefore, the relevant question is whether–as of the date of donation-there was a nonnegligible possibility that a recorded sale might have occurred without notice of the easement deed and before it was recorded.  If so, then the perpetuity requirements are not met.

“Petitioner has not argued or set forth facts to show that (1) the partnership was under any obligation not to sell the warehouse or that (2) NAT was under any obligation to record the easement deed.  Therefore, it was quite possible that a sale could have occurred at some point after donation of the easement but before the easement deed was recorded.  And given that property sales are almost always recorded, the possibility of a recorded sale before the easement deed was recorded was not so remote as to be negligible.” 2017 T. C. Memo. 115, at pp. 28-29. (Footnote omitted).

We wouldn’t have gone behind NAT’s back, says Ten Twenty Six. OK, says Judge Iron Mike, you could have disremembered to tell either NAT or your buyer about the easement, and that’s not so remote as to be negligible.

I shall not, in a blogpost meant for family reading, repeat the old joke about the translation of the words “trust me, trust me.”

No recording in the right year, no perpetuity, no deduction, 40% chop. Gross.

Read the Contract – The “F” is For Emphasis

I said this in this blog a long time ago; see my blogpost “RTFC,” 3/9/16. I say it quite often on the NYSBA Real Property Section listserve.

Clients seem to think contracts are rather like The Pirate’s Code: “Guidelines – Aspirational goals.” Well, maybe so, for those of them that are pirates…but that’s another story.

Judge Nega, a rather old-fashioned sort, seems to think that contracts are made to be read and followed. Here’s Thomas E. Watts and Mary E. Watts, 2017 T. C. Memo. 114, filed 6/14/17.

Except it’s really the story of RW, the partnership between la famille Watts and Wellspring, hedgefundamentalists.

The Watts gang were big-time pro-shop operators, employing hundreds, having locations all along the sunbelt, making big bucks. Wellspring offers a buyout, and to keep the Watts gang managing (and collecting rent on the pro shops they owned themselves but leased to their golfing selves), they set up a preferred-common duality in their LLC.

It’s got the usual preferred payout at dissolution or sale of all assets, guaranteed payments for interest on the cash they gave the Watts gang, various kickers, all subordinate only to creditors. The excerpts quoted by Judge Nega show a professional job of the usual sort where big buck investors bankroll canny but low budget operators.

Comes along another hedgefundamentalist, which I’ll call “fundie,” who sees the boodle raked in by the golfers and makes them an offer, and a national sporting goods chain who offers even bigger bucks.

Per the contract, Wellspring has the call, and can drag the Watts gang (kicking and screaming as they will) whithersoever the Wellspringers want to go. But the Watts gang claim the chain gang will wreck the brand, steal the locations, and fire the loyal brigade of workers who made Watts what they are.

So Wellspring sells to fundie, for $35 million less than they would have gotten from the national chain. There follows an extraordinary footnote from Judge Nega.

“Other than petitioners’ uncorroborated testimony, the record does not indicate what motivated Wellspring’s decision to sell to [fundie].  No representative of Wellspring was called to testify, and no documentation reflecting bids, proposals, negotiated terms, or agreements were entered into evidence.

“Petitioners’ theory of the case does not reconcile the $35 million difference between the purported [chain]’s and [fundie] bids.  Wellspring held exclusive power to sell all of Partnership, to drag along the common partners.  Petitioners avoided discussion of Wellspring’s drag-along rights and did not address any potential damage the Watts brothers’ protests and holdout threats may have inflicted on any potential sale to [chain], and whether this may have resulted in [fundie]’s effectively being the buyer of last resort.” 2017 T. C. Memo. 114, at p. 13, footnote 10 (names omitted).

Must’a been a helluva lotta howling from Watts gang, to say nothing of their selfless love of the working stiffs peddling their nine irons, to get a preferred, front-seat, last-dollar-in and first- dollar-out hedge fund partner to walk from $35 million. I’d love to know how they did it, given that they weren’t able to prove how they were getting any part of that money in any event. Well, maybe so a couple hundred K (hi, Judge Holmes).

Howbeit, relying on trusty accountant HG, the Watts gang claims they abandoned their partnership interests and got an ordinary loss.

Watts wants Judge Nega to buy the idea that Watts had a right to money, which they gave to Wellspring to get Wellspring to do the fundie deal and not the chain. You can do that, maybe, with the substance-over-form argument that Watts is trying, but you need strong proof. Judge Nega is “unmoved.” 2014 T. C. Memo. 114, at p. 17.

Watts has nothing but the Michael Corleone ploy.

Judge Nega walks the walk of ex-Ch J Michael B (“Iron Mike”) Thornton, but instead of “chewin’ de stuffin’ out’n de dictionary,” in O. Henry’s felicitous phrase, he chows down on the contract between Watts and Wellspring. At great length.

Watts claims no preferential treatment for Wellspring. Judge Nega has had it with that argument.

“In fact petitioners–at trial and on brief–entirely avoid discussing section 10 of the agreement.  Petitioners similarly avoid discussing section 3.4, the liquidation priority provisions, or the impact of any relevant defined terms or Wellspring’s $85.5 million initial capital account.  They made no effort to address, examine, construe or even allege any ambiguity within the terms of the agreement.  Petitioners did not even offer testimony as to their own personal knowledge and understanding of these provisions.  They offered no Partnership balance sheets, books, audit statements, or other accounting records as evidence or exhibit.  Petitioners called no members of Wellspring or [fundie] to testify and corroborate their theory at trial.

“Petitioners’ argument begins with a conclusion:  They were entitled to a pro rata share of the cash proceeds from the [fundie] sale.  It ends there, too.  Petitioners’ conclusory presumption runs contrary to the unambiguous wording of the agreement.” 2014 T. C. Memo. 114, at pp. 24-25.

Trusty accountant HG saves the Watts gang the negligence chops.

Takeaway- Read the contract, even without the “F” for emphasis.

Judge Lauber has a new take on the 197th item on the Rolling Stone all-time best song list, a classic from my fourteenth summer so long ago. Here’s Steven M. Petersen and Pauline Petersen, 148 T. C. 22, filed 6/13/17. But the story is really about their Sub S and ESOP.

Steve and Pauline and their Sub S’s trusty employee John (Larue being on board only because she filed jointly with John) were all participants in the Sub S’s ESOP, which everyone agrees was qualified. The Sub S accrued salary, payroll taxes and ESOP contributions for Steve, Pauline and John, but didn’t pay until the following January, the year when Steve and Pauline and John paid taxes thereon. Sub S was of course a calendar year, accrual basis taxpayer.

IRS swoops in and, citing Section 267(a)(2) deferral for any payment to a related person until said related person pays tax thereon, hits Steve and Pauline and John and Larue with SNODs for their flow-through deductions in the accrued year.

IRS claims that the ESOP stock held in their respective names makes Steve and Pauline and John related persons to the S Corp, by virtue of being beneficiaries of a trust which is a stockholder in the Sub S.

Apparently, this is a case of first impression, so trusty counsel for Steve and Pauline and John tries everything from Section 318 attribution rules (but 318 attribution is Subchapter C, and 267 is Subchapter B, so Section 318(a) limits 318 attribution to “this subchapter”) to “The ESOP is not a trust under UT law” (so what, says Judge Lauber, federal law controls). Besides, the ESOP is qualified and to comply with ERISA and the whole statutory scheme (and its own organic documents), the ESOP must be a trust.

Judge Lauber, more patient than I, wades through the whole mass of arguments, but at the end of the day, his message to Steve and Pauline and John and Larue is that of The King: Don’t Be Accrual.

Certain words and phrases should be weighed very carefully before use, especially in litigation. While instances arise where one side swears “black,” and the other “white,” but the answer is not “grey,” or even fifty shades thereof, far too often the answer is one or the other, and not “grey, or even fifty shades thereof.”

Today’s illustrative offering from Judge Nega is Larry Geneser, 2017 T. C. Memo. 110, filed 6/12/17. The date is a milestone for me, but bears not at all on the matter at hand.

Larry is fighting over SE. He spent about 26 years as an IC for an insurance company, and carried a debit. This was a balance of advanced commissions, to be repaid as the commissions were earned. The insurance company gave Larry a 1099-MISC (nonemployee comp) when he stopped selling for them.

Larry didn’t file for that year, claiming he was sick, but hadn’t enough evidence thereof to convince Judge Nega.

The SE issue is based upon Section 1402(k). Payments to life insurance salespeople are not subject to SE, provided same “’do[] not depend to any extent on length of service * * * performed for such company (without regard to whether eligibility for payment depends on length of service)’.” 2017 T. C. Memo. 110, at p. 7.

However, Larry’s contracts with the insurer (AIL) are in evidence.

“Petitioner and AIL entered into several State general agent contracts.  One contract (effective October 20, 2003) set forth a vesting schedule for commissions that was dependent on an agent’s length of service at AIL and stated that ‘all (100%) of the commissions earned following the General Agent’s termination date shall be vested’ if the agent has ‘completed ten years of continuous service’.  The last contract between petitioner and AIL (effective August 1, 2004) stated that petitioner, for the one year period beginning on the date of termination, ‘will not engage in the life or health insurance business in any territory possessed by the State General Agent during the year proceeding termination, utilizing the union, credit union, or association sales procedures of the company.’  That contract also stated that ‘[c]ommissions are determined by the schedule in effect at the time the insurance is issued’.” 2017 T. C. Memo. at p. 3.

Larry is represented by counsel. There follows an example of the sort of thing that ages counsel.

“Petitioner’s commission payments credited toward his account in 2010 were dependent on his length of service at AIL.  Accordingly, petitioner does not meet the requirements of section 1402(k).  Petitioner’s testimony that he ‘absolutely’ meets all the requirements of section 1402(k) exemplifies self-serving testimony and, apart from being neither convincing nor persuasive, is inherently incredible. Petitioner may not exclude the $903,707 in commission payments from his net earnings from self-employment under section 1402(a), and those earnings are therefore subject to self-employment tax under section 1401.  See Rule 142(a).” 2017 T. C. Memo. 110, at p. 7.

As a well-known on-line chess lecturer says “And we can stop here.”

Absolutely.

As at blogpost 2,000: 244 followers, 103,548 views, 42,560 viewers from 144 countries, territories (both autonomous, semi-autonomous and whatever), and still enthusiastic.

I said once before that The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Illustrious, Indefatigable, Irrefragable, Ineluctable, Imperturbable, Incontrovertible and Insuperable Foe of the Partitive Genitive, Old China Hand and Master Silt Stirrer, Judge Mark V. Holmes, knows his way around the Health Insurance Portability and Accountability Act of 1996, 42 USC §1301 et seq. In support thereof, see my blogpost “Hip To HIPAA,” 12/6/16.

Confidentially speaking, of course.

Well, today Judge Holmes reprises his expertise in another permutation of Continuing Life Communities Thousand Oaks LLC, Spieker CLC, LLC, Tax Matters Partner, Docket No. 4806-15, filed 6/9/17. And he even designates this one, making it easy for the hard-laboring blogger who still has to get out a contract of sale tonight.

OK, so IRS will issue a subpoena duces tecum (that means deliver documents and stuff, as well as testify; we had a ribald name for the testify-only version in my law school days) to Kenneth J. Cummins, the trustee of the University Village Thousand Oaks Master Trust. “Mr. Cummins contends that the information respondent seeks may be protected from disclosure under state and federal law, including the Health Insurance Portability and Accountability Act (HIPAA).” Order, at p. 1.

OK, says Judge Holmes, now I got a Rule 103 protective order motion. But first, a wee hint to the drafters. “The parties are gently reminded that their protected-health-information related citations should be to Title 45, not Titles 42 or 46, of the Code of Federal Regulations and to Title 42, not Title 24, of the United States Code.” Order, at p. 7.

Sandwiched between Mr Cummins’ plea for secrecy and Judge Holmes’ copyediting, is a lengthy form of order and governing terms thereof.

I recommend these to the careful review of practitioners who have to deal with HIPAA-protected materials. Put the terms of the order in the wordproccesor next to the order from last December, cited in my above-captioned blogpost. Tailor carefully to suit.

It’s an old truism, but petitioners are usually unaware: the petitioner has the burden of proof, paper is everything because petitioner’s word is rarely enough.

This is true even of lawyers. Today’s story features attorney Catherine Ann Riggins, 2017 T. C. Memo. 106, filed 6/8/17.

While maybe Catherine Ann was the victim of identity theft, she didn’t argue that. Though Judge Pugh found it “a curious detail” that the notice of tax due, which followed the SFR IRS issued Catherine Ann when she didn’t file her return, was sent to the wrong address, that doesn’t change the result.

“Respondent’s records indicate that petitioner may have been the subject of identity theft, resulting in an incorrect address being used on a notice to her of taxes owed pursuant to the substitute for return.  The actual substitute for return was not sent to petitioner, and she appears to have been unaware of the possible identity theft.  Sec. 6020 and sec. 301.6020-1, Proced. & Admin. Regs., do not require respondent to provide the substitute for return, and we find that the fact that respondent used the wrong address for the earlier notice does not affect our jurisdiction or the outcome of this case although it is a curious detail.  The notice of deficiency upon which the case is based was correctly addressed to petitioner, and she does not argue that she did not receive that notice.” 2017 T. C. Memo. 106, at p. 3, footnote 2.

Catherine Ann sent in a Form 1040 post-SNOD, which IRS processed, and applied the overpayment she claimed to a nontax debt (nature unstated).

Catherine Ann timely petitioned the SNOD. She tried to bar IRS from contesting the information she claimed on her late-filed return, but put in no evidence herself at trial in support of said information.

“Section 6512(a) provides that ‘[i]f the Secretary has mailed to the taxpayer a notice of deficiency * * * and if the taxpayer files a petition with the Tax Court within the time prescribed * * *, no credit or refund of income tax for the same taxable year * * * shall be allowed or made’ other than (as relevant here) as determined in a final decision of the Tax Court or as collected in excess of the amount in our decision, or to the extent determined as part of our overpayment jurisdiction.” 2017 T. C. Memo. 106, at p. 6.

Once you petition, Tax Court takes over. Even concessions are subject to Court review.

“Petitioner has not established that respondent’s processing of her return and offset of her nontax debt was anything other than an error.  Petitioner has not presented, nor are we aware of, any cases holding that postpetition processing of a tax return and issuance of a refund or offset constitutes a binding settlement of the liability at issue in the petition. Nor does she so argue.” 2017 T. C. Memo. 106, at pp. 9-10 (Footnote omitted, but read it; it sets out the law regarding enforcement of settlements in Tax Court, and what happened here isn’t one).

There’s more, but it doesn’t help.

“Even if a taxpayer files a return after the Commissioner issues a notice of deficiency, the taxpayer still must come forward with evidence as to any deductions claimed on the return. The return itself is not considered evidence.” 2017 T. C. Memo. 106, at pp. 11-12. (Citations omitted).

Signing a return under penalty of perjury is insufficient; it’s just the taxpayer’s litigating position, and establishes nothing.

Moreover, Catherine Ann should know better.

“Petitioner took the position that she was not required to file a return until advised by respondent.  Petitioner’s legal position is expressly contradicted by section 6012(a)(1)(A), which requires that individuals file returns if their income exceeds the exemption amount plus the standard deduction. Courts long have held that ignorance of the law is no excuse, and we will not make an exception here.  United States v. Int’l Minerals & Chem. Corp., 402 U.S. 558, 563 (1971) (‘The principle that ignorance of the law is no defense applies whether the law be a statute or a duly promulgated and published regulation.’); Carlebach v. Commissioner, 139 T.C. 1, 17 (2012).  And we find petitioner’s claimed ignorance of the law particularly unappealing because she is a lawyer.  In addition, petitioner did not make any other argument to justify her failure timely to pay.  As to petitioner’s failure timely to pay, she maintained at trial and in posttrial briefing that she did not have an obligation to file a return until advised by respondent because she was due a refund, which as we note above does not establish reasonable cause for her failure to comply with the law.  She now must accept the consequences of resting her entire case on this one argument.” 2017 T. C. Memo. 106, at pp. 15-16.

And though IRS was able to recover the payment of Catherine Ann’s nontax debt, Judge Pugh finds that irrelevant.

Takeaway- Though Tax Court may be a “small court,” try your case like it was a very big court.

No. not the 1924 Stallings-Anderson Broadway hit. In place of Sergeant Quint and Captain Flagg battling one another and Kaiser Bill, we have Ian D. Smith, 148 T. C. 21, filed 6/7/17, battling the Ogden Sunseteers.

ID turned up and handed over the skinny on a barter dodge that, when blown, netted the fisc $20 million. Collected. In hand paid.

All heart, the OS claim that less than $2 million of the swag came from info directly provided by ID, and the rest from the Bould Revenoors who swooped down on the barterers and emerged with the boodle. So ID is in the 10% class, less sequester.

The magic language for Judge Gerber to unpack is “amount in dispute.” Is that only what turned up when IRS’s sleuths followed only ID’s lead, or what they eventually unearthed after ID turned them on to the villains?

Section 7623(b)(5) provides the $2 million threshold for applying the 15% to 30% bonus. Below that, the blower only can get 10%. In either case, of course, the 7.3% sequester taketh away whatever the blower gets.

All ID’s direct stuff got was $198K, based upon $1.77 million of employment tax chicanery. The remaining $19 million of income tax money IRS got by themselves.

Need I point out that if ID didn’t turn IRS’s sleuths on to the perps, IRS would have gotten, you should pardon the expression, bortscht?

Well, Judge Gerber, with a case of first impression, comes down for ID.

“We are unable to accept respondent’s contention that the subsection (b)(1) determination of the size or percentage of an award applies only to those portions that were directly or indirectly attributable to the whistleblower’s information or that respondent’s definition of ‘amounts in dispute’ should be employed to determine whether the $2 million threshold of subsection (b)(5)(B) has been met.  The application of respondent’s position in this case would lead to anomalous results.  Petitioner’s whistleblower claim caused the initiation of an examination that resulted in the collection of almost $20 million of tax and penalties, almost $2 million of which was directly or indirectly attributable to petitioner’s information. In spite of those results, under respondent’s position the provisions of section 7623(b) would not be applicable in this case.” 148 T. C. 21, at pp. 15-16.

If this subject intrigues you (and it did intrigue me), see my blogpost “The $200,000 Misunderstanding,” 11/20/14, the Rob Lippolis story. And today Rob is back, with IRS again failing the summary J highjump, in Robert Lippolis, 2017 T. C. Memo. 104, filed 6/7/17. When I said in my aforementioned blogpost that IRS will have to plead and prove what was “in dispute,” I got it right.

ID does even better than Rob.

“Accordingly, it does not follow that the limiting standards of section 7623(b)(1) and (2) providing for a percentage to be applied to the portion of  ‘collected proceeds’ to which the whistleblower’s information ‘substantially contributed’ would also apply in determining whether the initial $2 million threshold has been met.  Conceptually, section 7623(b)(5) is a threshold to ensure that the less discretionary mandate of subsection (b)(1) is applied to taxpayers with a certain minimum amount of annual income or with a significant amount of tax liability.  In effect, respondent has backed into the subsection (b)(1) and (2) limitations to interpret the subsection (b)(5) threshold.” 148 T. C. 21, at pp. 22-23.

The threshold is reached. All that remains is to determine how much ID’s info helped. But he’s in the 15%-30% zone.