Judge David Gustafson is the original Obliging Jurist. He won’t give you warm milk and cookies while his Chambers Administrator reads you his latest order, nor will he draft your motions for you, argue your case for you, or bring coffee and doughnuts to calendar call. I’ve chronicled all these in previous blogposts.

Today, he won’t let you off the hook if you claim that filing your three (count ‘em, three) unfiled years’ returns and a completed Form 433-A is “cumbersome and invasive.” He’s obliging, but won’t take your word that you can’t pay, or can only pay installments. And he won’t tell IRS to do that either.

So he bounces the petition of David Edward Lewis, 20410-16L, filed 9/15/17.

“Mr. Lewis’s petition and response quoted above contend that Appeals should have granted him an IA without requiring him to provide financial information, which he considered “cumbersome and invasive”. However, we have often held that it is not an abuse of discretion for Appeals to reject a collection alternative because the taxpayer failed to submit requested financial information. Tucker v. Commissioner, T.C. Memo. 2014-103; Huntress v. Commissioner, T.C. Memo. 2009-161. The IRS is charged with the duty to collect taxes; and when a taxpayer fails to pay his taxes after notice and demand, the IRS is authorized to collect them by levy. The CDP process creates an opportunity for a taxpayer to request the agency’s forbearance, and IRS procedures are reasonably constructed to assure that such forbearance is granted only where it is justified. Mr. Lewis’s refusal to give financial information about himself made it impossible for the IRS to determine whether (as he alleged on Form 12153) he ‘cannot pay balance’. He effectively demanded that the IRS simply accept that allegation on his say-so, but the IRS is not required to do so. Appeals did not abuse its discretion in denying a collection alternative in the absence of such financial information.” Order, at p. 5.

I must add Judge Gustafson will explain the law to you very clearly. And visit you in the slammer to try your case.

I’ve sometimes criticized His Honor Big Julie Judge Julian I Jacobs, hereinafter HHBJJJIJ, for designating too many of his orders. Not this time. Not today.

Maria J. Calica, Docket No. 304-17, filed 9/15/17, needs to read and heed, because HHBJJJIJ is letting her know she’s running out of runway and a long way from rotation.

IRS gave Maria two conference dates to hand over documents in person, and a Rule 72 Request to Produce Documents when she failed to show for either of the foregoing, but Maria did nothing.

HHBJJJIJ finds Maria’s diffidence less than helpful, and is warming up to throw Maria’s petition out of the park.

So let Maria show up at Chief Counsel’s San Diego digs with the goods.

Failing which, the wrath of HHBJJJIJ will descend upon her heavily.

“Petitioner is warned that in the event she does not fully comply with the provisions of this Order, the Court may impose sanctions pursuant to Tax Court Rule 104, including an Order that (1) the issues to which respondent’s discovery request pertain shall be taken as established in this case as set forth in (and petitioner will be prohibited from offering evidence to rebut the determinations made in) the notice of deficiency issued to petitioner, (2) the assignments of error set forth in the petition will be struck, and (3) such other and further relief as the Court deems proper.” Order, at p. 2. And it’s in bold-faced type on the website.

We bloggers are mostly spectators. Sometimes we behave like fans, shouting at players and officials, expatiating on our own alleged brilliance, and, in this particular case, generally adding some color and spice to an otherwise arid and hypertechnical narrative.

I was on a tear concerning unadmitted persons, specifically CPAs, being admitted generally, not even pro hæc vice, to Tax Court without examination or statutory qualification. Well, perhaps my hollering from the bleachers has had some effect.

No one less than Ch J L Paige (“Iron Fist”) Marvel has put up the “No Admittance” sign on the Glasshouse door at 400 Second Street, NW. And she’s on a tear her own self in Bunthan In, Docket No. 3530-17, filed 9/14/17, although with laudable judicial restraint.

Bunthan mailed in a letter with a SNOD for the year at issue. As is only right, Ch J Iron Fist treated it as an imperfect petition, told Bunthan to file a proper amended petition and to plunk down the sixty buck entrance fee.

Bunthan stumps up the sixty bucks, with another letter saying he can’t pay what IRS says he owes, but doesn’t explain what’s wrong with the SNOD. “However, because it did not in any way explain Petitioner’s substantive disagreement with the underlying notice of deficiency, the letter was not in the nature of an Amended Petition and potentially signaled a degree of confusion as to what was required of petitioner at that juncture.” Order, at p. 1.

So Ch J Iron Fist judge-‘splained by order what a proper petition from a SNOD should say, and gave Bunthan one mo’ time to get it right.

But Bunthan stood mute and pat, so Ch J Iron Fist tossed him.

Comes now TH, CPA (name omitted), and mails Ch J Iron Fist a billet doux stating Bunthan’s average annual business income and enclosing an amended return for the year at issue.

Ch J Iron Fist is less than amused.

“Yet the Internal Revenue Service (IRS) is entirely separate from the Tax Court, and it is the IRS, not the Court, that processes tax returns.” Order, at p. 2. Exactly what TH, CPA, thought he was doing is at best unclear.

If Bunthan is trying to reopen his case, he needs a proper amended petition. A tax return is not a petition. “Additionally, because the Tax Court, unlike the IRS, does NOT recognized powers of attorney, any such Amended Petition would need to be signed by petitioner personally.” Order, at p. 2.

But Ch J Iron Fist, as always protective of the rights of the perplexed, tries to save the day.

“Accordingly, to again protect petitioner to the extent possible, and in light of concerns of statutory finality, the Clerk of the Court was directed to file the representative’s correspondence on petitioner’s behalf as a Motion To Vacate Order of Dismissal. In an exercise of leniency, petitioner was then afforded yet another opportunity to file an Amended Petition and thereby to allow this case to be reopened.” Order, at p. 2.

As a far better writer than I could ever be put it, “The quality of mercy is not strained;/It droppeth as the gentle rain from heaven/Upon the place beneath./It is twice blest; It blesseth him that gives and him that takes.”

You can guess the rest; once again, Bunthan does nothing. Neither does TH, CPA.

So Bunthan In is out. Again.

No, not a successor to Harry Hope’s infamous dive, the venue of the 1946 Eugene O’Neill classic. This is the story of David L. (“Davy”) Jones, 2017 T. C. Sum. Op. 75, filed 9/13/17.

Davy missed a year’s tax return, so IRS gave him a SFR at no extra charge, and when Davy didn’t pay, hit him with a SNOD.

Did Davy pay? No. Did he petition? No. So IRS gave him a NITL at no additional charge. Davy does send in a Form 12153. Did Davy challenge liability? Yes. Did Davy propose a collection alternative? No.

Well, CDP hearing one gets rescheduled when Davy claims he didn’t get the SO’s letter giving him a chance to file the missing return.  CDP hearing two gets rescheduled for bad weather, and then rescheduled again because the SO “inadvertently misplaced petitioner’s case file.” 2017 T. C. Sum. Op. 75, at p. 4.

So the SO sent another letter setting up a further adjourned CDP hearing, but Davy neither came on the phone nor asked for a further adjournment.

The SO then sent Davy a “last chance” letter. This said, “If you don’t have anything to tell me I’ll go by the file and decide.”

Davy claims he never got the “last chance” letter, although IRS claims it was sent to the last address Davy gave them..

So the SO upholds the NITL, and Davy petitions.

“Petitioner disagrees with the SO’s determination because he contends that he did not receive the ‘last chance’ letter.  Once a taxpayer has been given a reasonable opportunity for a CDP hearing but has failed to avail himself of the opportunity, the SO may proceed in making a determination by reviewing the case file.  Oropeza v. Commissioner, T.C. Memo. 2008-94, aff’d, 402 F. App’x 221 (9th Cir. 2010); Taylor v. Commissioner, T.C. Memo. 2004-25, aff’d, 130 F. App’x 934 (9th Cir. 2005).” 2017 T. C. Sum. Op. 75, at p. 8.

Davy had two chances before the “last chance” letter to propose alternatives. Judge Ruwe says that’s enough.

Takeaway- The next-to-last chance may in fact be your last chance.

No, that’s not my phraseology, although I wish it were. My ignorance of seventeenth century Hebrew phraseology clearly disqualifies me from a Tax Court judgeship, even an STJ-ship.

That phrase comes from the linguistic arsenal of none other than The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Inveterate, Irrefragable, Irrefutable, Illustrious, Incontrovertible, Indefatigable, Ineffable, Ineluctable and Insuperable Foe of the Partitive Genitive, Old China Hand and Master Silt Stirrer, Judge Mark V. Holmes.

I welcome back to the blog the source of the aforementioned tohubohu, Harbinder S. Brar & Barbara P. Brar, Docket No. 1295-15, filed 9/12/17, a designated hitter from Judge Holmes’ wordprocessor.

Fans of this my blog may remember Br’er Brar’s previous appearance in my blogpost “Deft and Slimy,” 4/1/16, the companion FPAA to this partner-level deficiency.

Harb & Barb slugged it out to an almost-finish with a stip, and went off to do numbers. But they couldn’t agree about the $1,427,569 flow-through loss from Harb & Barb’s Sub S; IRS kicked $1,079,464 of it.

Judge Holmes puts the issue succinctly.

“The dispute here is whether, in performing the computation needed to enter decision in this case, we need to ignore the larger or the smaller of these amounts.” Order, at p. 2.

The rule is that this deficiency proceeding can only consider nonpartnership items.

For any who find this stuff of interest post-PATH, here’s the story.

“The key case, as both parties recognize, is Munro v. Commissioner, 92 T.C. 71 (1989). The Brars argue that in Munro we said ‘respondent may not take his proposed TEFRA partnership adjustments into account in a deficiency proceeding for any purpose, including the computation of the deficiency arising out of adjustments to nonpartnership items.’ Id. at 74 (emphasis added).’ This would suggest we ignore only the lower amount.

“The Commissioner points out that we also said in Munro that ‘partnership items must be ignored in deficiency proceedings, which relate exclusively to nonpartnership items,’ id. — note the absence of the qualifying “proposed” in this sentence. This would suggest we ignore the larger amount.” Order, at p. 2.

And so have courts read Munro to and including our pal Jason Chai.

But Judge Holmes sends the parties off to work everything out after he enters decision for IRS.

“We need to sever this case to allow for entry of this decision. We urge the parties to submit a stipulated decision in the companion partnership case quickly so the Brars don’t end up having to pay and then seek an overpayment refund or otherwise suffer from a failure to coordinate the two cases.” Order, at p. 3.

Let’s not stir any more silt.

Habitual readers of this my blog, a group of hardy, patient, hard-laboring practitioners and friends, are well-used to my praises of that Obliging Jurist, Judge David Gustafson. So well-used, in fact, that I need not repeat the many proofs of his solicitude I’ve heretofore chronicled.

But Judge Gustafson is tireless in going the twain and even the thrain, when asked for barely a couple hundred (hi, Judge Holmes, I’ll be getting over to you today) meters.

Case in point: Jefferey R. Fritzler, Deceased, and Sally M. Fritzler, Docket No. 9219-16, filed 9/12/17. It’s obviously Sally’s story, as Jeff is no longer with us.

Sally seems to be having trouble doing what Judge Gustafson told her, namely, getting herself or someone else appointed as ex’r or adm’r for the late Jeff, so as to keep his estate in the case. IRS wants to toss the case as to the late Jeff.

So next week in the Motor City, Judge Gustafson wants Sally and IRS to tell him why he shouldn’t toss the late Jeff’s estate.

OK, no biggie, there are dozens of such orders, where one of a conjoined petitioner is gone from the scene with no successor in view. So what’s up with Judge Gustafson’s solicitude?

“ORDERED that the undersigned judge’s Chambers Administrator shall promptly telephone Ms. Fritzler and read this order to her.” Order, at p. 2.

If he could, I’ll bet Judge Gustafson would send over warm milk and cookies.

My kind of judge.

This causes problems, but not only in baseball games. Here’s Janice Simonson & Karin Rasmussen, Docket No. 16601-17, filed 9/12/17, to show what can happen when someone conflates IRS with Tax Court, as told by Ch J L. Paige (“Iron Fist”) Marvel.

Jan & Karin petitioned a SNOD, but what they are after is a review by IRS of the CP2000 and their amended return for the year at issue.  They didn’t want to go to Tax Court at all. So they write to Ch J Iron Fist, asking to be released from 400 Second Street, NW.

But Ch J Iron Fist, as we all know, can’t drop a deficiency case, otherwise than for mootness or want of jurisdiction, without entering decision for the amount sought by IRS.

Naturally, Jan & Karin never paid the sixty buck cover charge, so they can get tossed if they don’t ante up.

Nonetheless, Ch J Iron Fist, perhaps as a result of some comments heretofore appearing on this my blog, cautions Jan & Karin that by seeking to leave Tax Court, they are leaving behind something they might want to keep.

“If…no filing fee is received, the Court may dismiss this case for lack of jurisdiction. If this case is so dismissed, petitioners may lose their opportunity to dispute the…deficiency notice for [year at issue] upon which this case is based.” Order, at p. 2.

Hopefully Jan & Karin take the hint, fork over the sixty bucks, put the case on status report track, jawbone with the IRS attorney, and work it out.

When two insurance companies got the urge to merge, the successor filed a single Form 1120 for the entire year wherein the merger took place.

IRS claims there should have been a short-year 1120-PC for the predecessor, and a short year for successor, but since there wasn’t, and since the Section 368(a)(1)(F) tax-free merger was defective, IRS can go back 15 (count ‘em, 15 years) and zing successor for predecessor’s sins of omission and commission).

Negatory, says Judge Goeke, and puts out the fire in New Capital Fire, Inc., as Successor by Merger to The Capital Fire Insurance Company,” 2107 T. C. Memo. 177, filed 9/11/17.

The New Capitalists sent in a pro forma short-year 1120-PC along with the full-year 1120 for the year of the merger. That gave IRS all the numbers and started the three-years SOL running.

Fraud and substantial miscues are off the table.

“The notice of deficiency in this case was issued nearly nine years after New Capital filed its 2002 return.  Therefore, the period of limitations for the year at issue has expired and assessment is barred unless an exception to the general limitations period applies.  Respondent relies solely on the failure to file exception under section 6501(c)(3).  Under section 6501(c)(3), where a taxpayer fails to file a return, the tax may be assessed ‘at any time’.

“As we understand it, respondent’s position is that we have before us two separate taxpayers–Old Capital and New Capital–that were each required to file tax returns.  Old Capital did not file a return for the short tax year ending December 4, 2002.  Only New Capital filed a return for the tax year ending December 31, 2002.  New Capital’s 2002 return with the accompanying pro forma return, respondent urges, does not qualify as a valid return as it pertains to Old Capital’s short tax year.  On the basis of the undisputed facts, whether Old Capital was required to file a return for short tax year ending December 4, 2002, and failed to do so, makes no difference to the question of whether the period of limitations has expired.” 2017 T. C. Memo. 177, at p. 4.

But a return doesn’t have to be perfect to be a return.

“If a taxpayer files the wrong type of return, that wrong return will be sufficient to trigger the running of the period of limitations, so long as it satisfies the following test articulated in Beard v. Commissioner, 82 T.C. 766, 777 (1984), aff’d, 793 F.2d 139 (6th Cir. 1984): (1) the document must contain sufficient data to calculate tax liability; (2) the document must purport to be a return; (3) there must be an honest and reasonable attempt to satisfy the requirements of the tax law; and (4) the taxpayer must have executed the document under penalties of perjury.” 2017 T. C. Memo. 177, at p. 6.

“The pro forma return included with New Capital’s 2002 return listed the name of the taxpayer as ‘The Capital Fire Insurance Co.’ and reported income, deductions, and credits that were included in the notice of deficiency at issue in this case.  Indeed, New Capital’s 2002 return contained sufficient information to calculate Old Capital’s tax liability.

“On its 2002 return New Capital reported Old Capital’s tax payments, listed Old Capital’s EIN, and checked the box stating that it was the ‘Final Return’ for Old Capital.  New Capital’s 2002 return clearly purported to be a return and was executed under penalties of perjury.” 2017 T. C. Memo. 177, at p. 7.

So what, says IRS, the return as filed was “purposely misleading.” So what, indeed, says Judge Goeke. Fraud and evasion are off the table. So y’all were slow away from the gate in scoping out the return. That’s too bad, but that’s why there’s a three-year SOL.

I note that among winning counsel for the New Capitalists was an alumnus of the ABA/NYSBA Subcommittee on Taxation of Cooperatives and Condominiums, s/a/k/a Uncle Charlie’s Pizza Party.

Well done, OT!

The distributees of the late Minnie Sower benefit from the portable Deceased Spousal Unused Exclusion from the estate of her late husband Frank, but IRS shrunk it from $1,256,033 to $282,690. Oh, IRS also increased the late Minnie’s tax liability by the amount of her lifetime taxable gifts (unified credit, y’know). But, being all heart, IRS did give Minnie’s estate an extra $850 in funeral expenses to deduct. Thus, Minnie’s largesse is reduced by $788,165. 149 T. C. 11, at p. 6, filed 9/11/17.

Full caption reads “Estate of Minnie Lynn Sower, Deceased, Frank W. Sower, Jr. and John R. Sower, Co-Executors v. Com’r.”

IRS has first signed off on the late Frank’s estate with a Letter 627, the famous closing letter. But then IRS went back, using only the stuff Frank’s ex’rs had given them before (nothing new, so no “second examination” per Section 7605(b)), and shrunk the exclusion. But there was no SNOD issued to the late Frank’s ex’rs, and they got a new Letter 627.

Minnie’s ex’rs argue the first Letter 627 was a Section 7121 settlement agreement. But it wasn’t.

Judge Buch: “The Commissioner has strict rules governing closing agreements. Under the applicable regulations only the prescribed forms, Form 866, Agreement as to Final Determination of Tax Liability, and Form 906, Closing Agreement on Final Determination Covering Specific Matters, qualify as closing agreements.  Sec. 601.202(b), Statement of Procedural Rules; sec. 301.7212-1(d)(1), Proced. & Admin. Regs.” 149 T. C. 11, at p. 12. The only “extraordinarily rare” exception is an exchange of correspondence comprising an offer and acceptance, and there aren’t many. This case isn’t one.

Estoppel doesn’t apply (and that’s another rare situation), because no one changed position in reliance, and no one who had no tax liability before now has one.

And the three-year Section 6501  SOL only applies if more tax is assessed against the late Frank’s estate, and here it isn’t.

Duane Pankratz, et al. Docket No. 21255-13, filed 9/8/17, and his sly counsel play a cool hand in Tax Court, even without the als.

Duane’s counsel dissects the barebones SNOD and the even barer-boned answer to Duane’s petition by means of skillful interrogatories, and gets Judge Holmes to knock out IRS’ attempt to try by consent Duane’s Section 469 material participation or whether Duane’s sale of one of his businesses’ building was a bargain sale. IRS could have amended its answer when discovery turned up some of this stuff, but didn’t. Game over on those issues.

Then, despite an order directing Duane’s counsel to pony up all documents to be introduced at trial, Duane’s counsel slyly drafts Requests For Admissions (RFA) and therein tries to sandbag IRS by sneaking in documents otherwise precluded by the time limits of Judge Holmes’ earlier order aforesaid.

“In drafting the RFAs, petitioner attached at least some documents that will be subject to exclusion; he also apparently attached some that respondent thinks are excludable but petitioner does not. Petitioner then phrased the RFAs not as straightforward ‘Petitioner paid or incurred expenses in the amount of $ X for such and such category of expense as claimed on Schedule C, line so and so;’ but instead as ‘Petitioner provided proof of payment and invoices for 2008 Schedule C-1 costs of such and such in the amount of so forth.’

“Respondent understandably views this as a backdoor way to get in evidence subject to the Court’s preclusion order. His responses generally took the form of denying that the attached documents had been provided in time, and then something about the substance of the RFA.” Order, at p. 2.

IRS’ carefully crafted responses pass muster.

I’m a great fan of notices to admit, as we State courtiers call Requests for Admissions. You can always try to submarine good stuff into evidence by any means at hand, but don’t be surprised if you’re torpedoed in a designated hitter.