No, I’m not showing off my Italian; I know very little. But the title of this blogpost is a pun. The old saying “Chi si ferma è perduto” (he who hesitates is lost) mutated to “Chi se firma è perduto” (he who signs his name is lost) in the upheavals between 1943 and 1945, when Italy was divided by war, and signing one’s name to anything might not end well for the signer.

Well, Charles D. Shaffran, Sr., 2017 T. C. Memo. 35, filed 2/16/17, avoided that fate, even though he signed a couple checks (hi, Judge Holmes) for the soon-to-be-defunct Sunset Charlie’s restaurant, courtesy of Judge Vasquez.

Charlie’s son Carlos was a partner in the restaurant. Charlie was not, although their signatures were remarkably similar. Charlie, retired from the assembly line at Ford, hung around the place with his disabled wife to look at the FL sunset.

Charlie did sign two checks when suppliers showed up and nobody was around. He signed his own name, even though he was not a signatory on the account. The bank paid anyway. And he signed two more with the authority of Mr. Roberts, the managing member of the LLC that owned the place.

As Sunset Charlie’s was sunsetting and the SOL running on the TFRPs for the $85K in unpaid FICA-FUTA, Revenue Officer K (name omitted) gets dud info from the manager of the building from which Sunset Charlie’s was evicted for nonpayment, and hits Charlie with a Letter 1153, telling him to pony up. But Charlie’s address was a PO box he shared with Carlos, who intercepted the letter.

Sound familiar? See my blogpost “You Didn’t Get It – Part Deux,” 5/31/13, another filial interception.

So Charlie only gets the NFTL. Appeals confirms despite Charlie’s non-receipt beef. So Charlie gets de novo review, as he had no chance to contest the 1153 because of the interception. Judge Vasquez notes the signature on the receipt for the 1153 is Carlos’, not Charlie’s.

RO K didn’t do a thorough checkout of bank records because of the short SOL. Anyway, “RO K did not provide similar relief to petitioner because she confused petitioner’s signature with Carlos’ and was therefore under the mistaken impression that petitioner regularly signed Restaurant Group’s checks.” 2017 T. C. Memo. 35, at p. 7. (Name omitted).

Charlie didn’t file a post-trial brief, which generally (love that word) would mean he conceded the case, but Judge Vasquez gives him a bye in the interests of justice.

Judge Vasquez buys Charlie’s testimony, despite a couple of minor inconsistencies.

The test for responsible personhood, and thus TFRP, is command-and-control. Charlie wasn’t an officer, wasn’t authorized to sign the business accounts, had no hire-fire powers, had no command responsibilities, didn’t have the right to see the books, bank statements, tax returns or anything else.

Charlie just sat around with Mrs Charlie and looked at the sunset. Sort of like those dudes in Ogden, UT.

“We are not persuaded by respondent’s argument that petitioner is a responsible person because he signed and/or wrote out a small number of Restaurant Group’s checks. The four checks bearing petitioner’s signature were all signed in the span of two weeks…when Mr. Roberts was out of town (and before four of the five tax periods in question). Of these four checks… two were written and signed only after Mr. Roberts had told petitioner to do so. The other two were signed in unusual circumstances where petitioner was the only person available to take delivery of vendor orders. Such limited check signing activity does not support a finding that petitioner had sufficient control over Restaurant Group’s affairs to avert the nonpayment of its employment taxes.” 2017 T. C. Memo. 35, at pp. 16-17. (Footnote omitted, but I’ll get back to it).

And RO K did her best under great time pressure. There were only three weeks to go before the SOL ran on the unpaid trust funds.

Judge Vasquez: “We note that RO K, who was working under enormous time pressure because of the looming expiration of the period of limitations, erroneously concluded that petitioner had regularly signed Restaurant Group’s checks during the tax periods in question. We believe RO K would have withdrawn her recommendation to assess TFRPs against petitioner had she not confused Carlos’ signature with petitioner’s.” 2017 T. C. Memo. 35, at p. 17, Footnote 14. (Name omitted).

Still and all, don’t sign other peoples’ checks.

That obliging jurist Judge David Gustafson certainly can be a stickler. “Punctilious” barely describes the logical surgery Judge Gustafson performs in Dean Matthew Vigon, Docket No. 287880-14L, filed 2/16/17, a designated hitter.

Dean Matthew is fighting a lien-levy, and IRS folds on the eve of trial.

“IRS is conceding that petitioner Dean Matthew Vigon is not liable for the penalties at issue in this case; that the process of abating those liabilities is almost complete; that the process of releasing the liens at issue has been initiated; and that once those processes have been completed, the IRS intends to file a motion to dismiss the case on grounds of mootness.” Order, at p. 1.

Sounds pretty good if you’re in Dean Matthew’s position, no? So why is Judge Gustafson designating this order?

It’s not because he wants to commend IRS’s counsel for “prompt and efficient work on this case”, although he does that, too.

No, because dismissing a collection case for mootness, where petitioner challenges liability for the tax at issue, doesn’t do enough.

“We understand how collection issues under section 6330(c)(2)(A) become moot if collection activity ceases. It is less clear how a liability challenge under section 6330(c)(2)(B) becomes moot merely upon an announced concession, which would not seem to have any res judicata or collateral estoppel effect. Perhaps a CDP petitioner who makes a liability challenge that the IRS concedes is entitled to decision in his favor on the liability issues.” Order, at p. 1.

Prompt and efficient IRS counsel, take the hint.

It’s decision document time, and Judge Gustafson gives IRS counsel until March to do so.

If You Make Discounts

Those among my readers with exceptionally long memories may remember that Moneygram International, Incorporated and Subsidiaries were classed as unbanked back in 2015. If you don’t, see my blogpost “Don’t Bank On It,” 1/7/15.

This dogfight involved $82 million in deficiencies, since the capital-loss-against-ordinary-income largesse of Section 581 was the lynchpin of Moneygram’s case. Hence, the Fifth Circuit’s aid was invoked.

Well, back in November, a per cur. from the Fifth bounced the case back to Tax Court. Today the remand landed in Judge Lauber’s lap, to reconsider the full-dress T.C. It’s Moneygram International, Incorporated and Subsidiaries, Case No. 15-60527, decided 11/15/16.

In the first place, the Fifth said that Tax Court went outside the statute by defining deposits as those held for an extended period. Nope, said Fifth Circuit, the statute doesn’t say that. A deposit can be repayable on demand.

Likewise, Tax Court’s insistence that a bank make loans whose duration is an extended period of time stretches the common definition. A bank can make loans as short as it likes, provided that there is an advance and an intention that the sum advanced shall be repaid. Interest is an indicium of a loan, but is only one of seven common factors, to which I’ve referred in numerous blogposts.

“Additionally, we note that § 581 provides that a substantial part of the taxpayers business must consist of ‘making loans and discounts.’ 26 U.S.C. § 581 (emphasis added). The statute’s use of the conjunctive ‘and’ rather than the disjunctive ‘or’ in this phrase indicates that ‘discounts’ is a required element. See A. Scalia & B. Garner, Reading Law: The Interpretation of Legal Texts 116–17 (2012) (observing that the conjunctive use of the word ‘and’ indicates that each aspect must be satisfied). The Tax Court did not address whether MoneyGram makes ‘discounts,’ and neither party has presented argument regarding this requirement on appeal. On remand, the Tax Court is directed to consider whether MoneyGram satisfies this component of § 581.” Decision, at p. 12.

The dissent argues that Moneygram isn’t a bank by any stretch of the term, so making discounts is irrelevant.

And no, “discounts” by a bank doesn’t mean there are special friends of Rick’s. A bank discounts commercial paper when it pays for the paper at less than face, the amount paid including upfront interest. If you buy US savings bonds, you pay less than face but collect face at maturity. You’ve made a discount.

Hopefully Tyree Woodley, Docket No. 15662-15S, filed 2/15/17 is listening, because His Honor Big Julie, more properly styled Judge Julian I Jacobs, hereinafter HHBJJJIJ, has put him in first place on the designated hitter list today.

Tyree is coming up for trial in fewer than two weeks, but apparently wants out. At least, IRS’ counsel claims Tyree told him fuggedaboutit, or words to that effect.

But HHBJJJIJ wants to hear it from Tyree himself in person. So he called Tyree, and even gives Tyree’s telephone number in today’s order; remember Tax Court wants the fullest disclosure possible, so litigants, be aware – your life and miracles are up for grabs.

But Tyree wasn’t around, so to make sure that Tyree wants out and is prepared for the deficiency hit to the fullest extent, HHBJJJIJ tells Tyree to show, or call chambers (and to be fair, HHBJJJIJ gives his chambers telephone number in the order).

Should Tyree fail to take the hint, HHBJJJIJ has a new warning.

“PETITIONER’S FAILURE TO NOTIFY THE COURT AS TO WHETHER OR NOT HE OBJECTS TO THE COURT’S GRANTING RESPONDENT’S MOTION, OR BY FAILING TO APPEAR AT THE CALENDAR CALL FOR THE SESSION OF THE COURT COMMENCING FEBRUARY 27, 2017, IN PHILADELPHIA, PENNSYLVANIA, MAY RESULT IN THE COURT’S GRANTING RESPONDENT’S MOTION AND ENTERING OF A DECISION ADVERSE TO PETIITONER [sic].” Order, at pp. 1-2.

Back around 1966, if my ancient memory is still functioning, the Surgeon General of the USA led the world, inaugurating the warning on cigarette packs that smoking was dangerous to one’s health.

This so impressed me that I kept smoking until September 15, 1994.

Hopefully, His Honor Big Julie, more properly His Honor Judge Julian I Jacobs, hereinafter HHBJJJIJ, has issued a warning that will energize rather than anesthetize petitioners who fail to show up for hearings, when dismissal for want of prosecution is on the agenda.

It may be Valentine’s Day, but HHBJJJIJ isn’t waxing sentimental.

Here’s his designated hitter, Barbara Brose Graybill & John I. Graybill, Docket No. 6545-16S, filed 2/14/17.

Barb & John are on for trial in Philly, but IRS claims they haven’t prosecuted.

So HHBJJJIJ tells Barb & John to show up, because if they don’t:

“FAILURE TO APEAR [sic] BY PETITIONERS MAY RESULT IN THE COURT’S GRANING [sic] RESPONDENT’S MOTION AND THE ENTERING OF A DECISION ADVERSE TO PETITONERS [sic]. “ Order, at p. 1 (Emphasis in original.)

The rap on tax law is that it’s hypertechnical, dry-as-dust, and devoid of humanity. We tax lawyers are deemed to wander in this murky No-One’s-Land, gabbling unintelligibly to others similarly situated.

Well, today Mohammad M. Zarrinnegar and Mary M. Dini, 2017 T. C. Memo. 34, filed 2/13/17, bring some warmth on a cold afternoon, and even ex-Ch J Michael B (“Iron Mike”) Thornton has a grin to spare for Mo’s story.

Mo is a dentist, but he spends most of his logged hours running four (count ‘em, four) rental properties and real estate brokering. Mary is also a dentist, drilling and filling in the family tooth shop while Mo is brokering and managing.

Mo’s logs stand up for the 750 hours, even when most of his deductions crash on non-substantiation, inconsistent testimony, and illegible receipts.

So Mo’s a pro, and he gets his losses.

But the brokerage gig is what the jazz musicians of an earlier age called a “hame,” an unprofitable performance.

Mo is not a whit dismayed. And ex-Ch J Iron Mike is down wit’ that, as we say on this Minor Outlying US island off the Coast of North America.

“Petitioner husband testified that throughout the years at issue he had high hopes for the brokerage side of the business, despite the financial malaise burdening the housing market.  Undaunted despite earning only $8,500 in brokerage fees during the years at issue, petitioner-husband testified that he poured hundreds of hours each year into broker’s tours, listing searches, open houses, property viewings, client meetings, and other related activities, likening his efforts to the early labors of Bill Gates and Mark Zuckerberg, who toiled in obscurity and relative poverty before reaping fabulous profits.” 2017 T. C. Memo. 34, at p. 16, footnote 11.

Toiling in obscurity, that’s us, Mo.

It really isn’t an epithet I’d apply to Judge Cohen, whose all-business demeanor is well-known. She hews carefully to the statutes, regs and rules.

Today, however, an IRS miscue draws a sharp rebuke. Remember, this is Friday, when no opinions and few designated hitters are to be found on the order board.

It’s Edna Trigo-Valdez, Docket No. 14169-16, filed 2/10/17, but Edna is in standby mode here, because this order deals with Mark A. Valdez.

We know where an MFJ or spousal situation is in play, and only one spouse gets named and petitions, the other can jump in if invited. IRS does the inviting.

But here’s the problem. “On February 7, 2017, Respondent’s Notice of Filing of Petition and Right to Intervene on Mark A. Valdez 02/07/2017 was filed belatedly and without the proper motion for leave to file the late notice.” Order, at p. 1.

The dates are relevant, since this case is already on for trial. And the sixty-day time to intervene of Rule 325 means that Mark or Edna or IRS could ask for more time on the eve of trial.

Judge Cohen: “If the nonrequesting spouse files a notice of intervention within the time allowed, an otherwise inappropriate continuance may be necessary, thus wasting the Court’s time set aside for trials on the scheduled calendar. If no notice of intervention is filed, trial may proceed.” Order, at p. 1.

But of course no one will know until Day Sixty if Mark takes his full time to decide.

Still, Mark does have the right to intervene, and this wasn’t his fault.

But Judge Cohen isn’t thrilled: “…respondent [IRS] shall file with the Court a report setting forth an explanation as to why the notice filed February 7, 2017, was late and what steps have been taken to avoid such delinquency in the future.” Order, at p. 1.

I cannot stress often enough that a Power of Attorney, Form 2848, is a piece of paper whereby a taxpayer appoints an Agent to represent him/her/it/them before IRS.

But today The Judge with a Heart, STJ Armen, finds the “POA” might as well have been a piece of paper, in a designated hitter Charles E. Patrick, Docket 5259-16L, filed 2/9/17.

Although Charles was represented by counsel, when STJ Armen ordered him to respond to IRS’ motion for summary J sustaining the NOD that bounced Charles’ CDP, “…the Court attached to its… Order a copy of Q&As that the Court has prepared on the subject ‘What is a motion for summary judgment? How should I respond to one?’. Order, at p. 1.

Makes me wonder. I’d never suspect STJ Armen of being gratuitous, but doing that strikes me as belittling Charles’ lawyer. We all learned in Civil Procedure 101 to “marshal your evidence and lay bare your proofs, mere denials are worthless without corroborating facts, eschew conclusory affidavits by those without personal knowledge of the facts” and all that good stuff.

Maybe STJ Armen was right, because neither Charles nor his counsel responded.

Anyway, the HO’s declaration says the “POA” admitted at the CDP Charles got the SNOD, didn’t petition, but wanted to fight the underlying liability. The HO told him he couldn’t, but could try audit reconsideration (from which, of course, you can’t petition Tax Court).

Summary J for IRS.

Now maybe this all came about because the amount in dispute was $4K, so neither Charles nor counsel figured it was worth the trouble. But that’s sheer speculation on my part.

I remember Ch J L. Paige (“Iron Fist”) Marvel’s admonition to us at the last USTC Judicial Conference (and BTW, Ch J IF, when is the next one?) to “add a zero.” What might be small money to one person is blood money to another.

But it’s a warning to lawyers. Tax Court isn’t small claims court or village court or justice court. It has its statutes and its rules, and these are not to be ignored, however big-hearted the judge may be.

And please stop calling a person a piece of paper. Unless the person truly is a piece of paper.

That’s the good news Judge Morrison has for David W. Schieber and Janet L. Schieber, 2017 T. C. Memo. 32, filed 2/9/17.

Dave has a pension from CalPERS. Pursuant to the terms thereof, if Dave dies, Jan keeps getting the payments.

Dave and Jan get foreclosed on a property in which they do not reside, the knockdown price is less than the debt, and the lender doesn’t pursue.

Dave and Jan claim they were insolvent to the extent of part of the forgiven balance, so COD is off the table to that extent.

Dave’s lawyer says “(O)ther than the right to receive the monthly payments, the Schiebers could not access the value in the plan. They could not convert their interest in the plan to a lump-sum cash amount, sell the interest, assign the interest, borrow against the interest, or borrow from the plan.” 2017 T. C. Memo. 32, at p. 3.

IRS concedes this. Both sides stip that if pension is in, no insolvency, but if it’s out, Section 108 bails Dave and Jan.

However, IRS claims the pension is an asset, because even assets exempt from creditors can still be used to pay tax. See my blogpost “I’ve Been Workin’ on the Railroad,” 4/27/15, for an analogous situation.

Thus, says IRS, the pension is in.

But this isn’t collection alternative, where the big idea is the ability to pay over time from all sources.

Insolvency for Section 108 purposes is a snapshot, not a video.

The insolvency question is whether the asset can be realized on to pay, all by itself or in conjunction with all other assets, the amount of tax due all at once, immediately.

And here the pension cannot be turned into present cash. So Dave and Jan are off the hook for most of the COD, to the extent they were underwater.

Surely many of my readers, that small but mighty band, have been spending their leisure time agonizing over whether Elizabeth M. Jacobson can withdraw her petition from the NOD that scuttled her whistleblowing claim.

For any among you who had gotten a life instead, see my blogpost “A Blown Dismissal,” 11/29/16.

You now remember that Judge Lauber analogized whistleblowing to CDP-ing, and thought that since Wagner permitted lienees or levitated ones to withdraw their petitions, as there was no Section 7459 automatic decision for IRS except in a deficiency case, whistleblowers could do likewise.

But he wasn’t sure.

So, after having checked around with the Glasshouse Gang at 400 Second Street, NW, we get a unanimous full-dress T. C., namely and to wit, Elizabeth M. Jacobson, 148 T. C. 4, filed 2/8/17.

At Judge Lauber’s request, IRS filed a full response to Elizabeth’s motion. IRS had simply theretofore stated they didn’t object.

Surprise, surprise, IRS’ counsel finds the Wagner analogy apposite. And Judge Lauber does too.

“In the absence of any statutory requirement that we enter a decision consistent with an antecedent notice of deficiency, we looked to rule 41(a)(2) of the Federal Rules of Civil Procedure (Civil Rules), which permits dismissal in the sound discretion of the court.  The case law under Civil Rule 41(a)(2) indicated that a court should grant dismissal ‘unless the defendant will suffer clear legal prejudice.’  Wagner, 118 T.C. at 333 (quoting McCants v. Ford Motor Co., 781 F.2d 855, 856-857 (11th Cir. 1986)).” 148 T. C. 4, at p. 4.

So after all this wind-up, here comes the baseball.

“Section 7459(d), requiring entry of a decision in deficiency cases, likewise does not apply here.  Section 7623(b)(4), which grants this Court exclusive jurisdiction to review IRS determinations regarding whistleblower awards, provides that any appeal must be filed ‘within 30 days of such determination.’  Because the Office’s final determination on her claim was made 19 months ago, petitioner has no right to file another petition in our Court for review of that determination or ‘to file an appeal in the United States District Court or anywhere else.’  Dismissal of the instant case will thus leave binding on petitioner the IRS’…determination to deny her claim for an award.  ‘[I]n the exercise of the Court’s discretion, and after weighing the relevant equities including the lack of a clear legal prejudice to respondent,’ we will accordingly grant petitioner’s motion to dismiss.  Wagner, 118 T.C. at 334. “ 148 T. C. 4, at pp. 5-6.