Yes, but he really needs to petition the SNOD if he wants to contest liability.

Here’s The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Indefatigable, Ineluctable, Ineffable, Incontrovertible, Illustrious and Insuperable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes, with a prescription for Brent W. Sherwood & Janet K.  Sherwood, Docket No. 18946-15L, filed 10/26/16, a designated hitter.

Oh, and that’s Dr. Brent W. Sherwood, M.D., traveling emergency-room doctor.

IRS hit the moving target with a SNOD. Neither Dr Brent nor Janet K. petitioned same, but when they got the NITL, Dr Brent and Janet K. stepped up.

All they wanted to do was contest liability, but Appeals said sorry, you should’a done that when you got the SNOD.

“The Sherwoods admit with admirable honesty that Dr. Brent Sherwood received the notice of deficiency, but didn’t pay close attention to it because he was studying for his board certification — and we assume with some confidence that this is an exam even harder than the bar or CPA licensing exams. But his perhaps understandable focus on his profession and his simultaneous life-saving employment as a traveling emergency-room doctor doesn’t mean that the settlement officer made either an error of fact or one of law in concluding that the Sherwoods can’t challenge their underlying liability. See IRC § 6330(c)(2)(B).” Order, at p. 2.

And at Appeals Dr Brent and Janet K didn’t ask for an IA, or an OIC.

No matter how hard the exam, petition the SNOD. Or else you fail in Tax Court.

Well, no old-time theatre buff has ever corrected my assertion that the title hereof derives from George Kelly’ s 1924 comedy The Show-Off, whose lead character Aubrey Piper solemnly intones those words with a flourish of an ebony walking-stick.

But those words should mean a lot to Clyde A. Arashiro, 2016 T. C. Sum Op. 70, filed 10/26/16. And Judge Gale goes to some lengths to tell him why.

Clyde got lassoed by the cattle sheltering of Walter J. Hoyt III. Hoyt III was quite a promoter, eventually getting nailed for “fraud, mail fraud, bankruptcy fraud, and money laundering.” 2016 T. C. Sum. Op. 70, at p. 4, footnote 2.

Clyde kept taking the phony deductions thrown off by Hoyt III even after IRS fired a couple warning shots (hi, Judge Holmes), telling Clyde he was up for some chops.

Clyde got chopped, but is fighting about additions to tax and penalties.

And Judge Gale agrees that the only issue here is the chops.

Clyde puts in a Form 906, Closing Agreement on Final Determination Covering Specific Matters, saying he’ll get a loss for the money he gave Hoyt III, and is off the hook for additions to tax and penalties arising from the Hoyt inflicted upon him (sorry, guys).

Problem: “The copy of the closing agreement in the record is not signed by petitioner or a representative of respondent.” 2016 T. C. Sum. Op. 70, at p. 7.

So Clyde’s reliance on the unsigned copy of the closing agreement is out.

“We reject petitioner’s contention.  The only copy of the closing agreement petitioner produced is not signed by either petitioner or a representative of respondent.  Thus, accepting petitioner’s contention requires us to believe that he signed the closing agreement without making a copy of the signed version and instead–quite implausibly–made a copy of the agreement before signing it and retained that version.  We are unpersuaded by petitioner’s self-serving testimony in this regard… and find that he did not return a signed copy of the closing agreement to respondent.” 2016 T. C. Sum. Op. 70, at p. 13 (citations and footnote omitted, but see the following takeaway).

Takeaway—By Judge Gale in the omitted footnote: “See Rev. Proc. 68-16, sec. 6.07, 1968-1 C.B. 770, 780 (a closing agreement is always signed first by the taxpayer and ordinarily constitutes an offer to agree, while the signature for the Commissioner constitutes acceptance); see also Smith v. Commissioner, T.C. Memo. 1991-412.” 2016 T. C. Sum. Op. 70, at p. 13, footnote 8.

Make three copies, sign all three on the dotted line, keep one, send in the others to IRS, and make sure you get back a fully-signed duplicate original. Keep it in a safe place.

Often has a Tax Court Judge or STJ intoned the mantra “This is a court of limited jurisdiction. We can only do what Congress allowed.”

Alas the poor Article I judge, bereft of the extensive powers of her Article III colleagues. I remember the late Justice Antonin Scalia visiting haughty disdain on this “inferior court” established under the authority of Article I, Section 8, from his armchair at the post-cenam chat at Duke University, during the last Tax Court Judicial Conference. BTW, when will we be having the next one?

But sometimes even lowly STJ’s, worthily lamenting their inferiority, take that field marshal’s baton from their knapsacks and look longingly at it, before restoring it to the field pack on their weary shoulders.

Today it’s the turn of STJ Lewis (“footsoldier of Tax Court justice”) Carluzzo.

And it’s the next installment of Faith Lynn Brashear & Hendel N. Thistletop, Docket No. 13189-13, filed 10/26/16, a designated hitter. You remember Faith & Hen, no? What, no? Well, try my blogpost “Got To Be There – Part Deux,” 8/26/16. There, now.

Faith & Hen are still battling with their erstwhile attorney, whom I’ll call DJ. Faith & Hen refuse to pay, DJ wants out, Faith & Hen claim DJ is overcharging them. STJ Lew has an urge to sort it out, but forbears.

“In support of his motion, [DJ] submitted his time sheet/billing statement, which we have carefully reviewed. While we question the amount of time charged for some of the seemingly routine activities, there is insufficient evidence in that statement, or otherwise in the record, to support a finding that excess billings operate to violate the fiduciary duty owed to petitioners to such an extent so as to allow for an order of disgorgement. See Restatement (Third), Law Governing Lawyers, sec. 37. The fee dispute between petitioners and [DJ], should either party continue to pursue it, will have to be resolved in a different forum.” Order, at p. 1.

STJ Lew, how do you have jursidication (thanks, Judge Ashford), to decide the billing issue on papers, much less try the issue or order a disgorgement? If the review is to decide whether to let JP out of the case, what he charges or doesn’t charge is nothing to the point. If he claims Faith & Hen owe, and they don’t pay, unless there’s collusion with intent to stall, toss JP, and let Faith & Hen work out their salvation. The billing issue is nothing to do with the main deficiency, unless the legals are a claimed deduction, and even then you can only allow or disallow them.

The fee dispute should go to State court, where it belongs.

High on the list of Robert Gover’s (he of the cult novel The Hundred Dollar Misunderstanding) offspring is the Section 72(t) misunderstanding.

Case in point: Candace Elaine, Docket No. 26078-14S, filed 10/25/16, an off-the-bencher by STJ Lewis (“Oh, that name makes me want to sing”) Carluzzo.

The usual sad tale: Candace gets canned in 2009, as the economy melted down. Like many others, she used her retirement plan (type not stated) to feed and house her family. She declares the income therefrom but pays not the 10% chop thereon. Candace is in the under-59-1/2 set at the time.

Note that even STJ Lew gets messed up, as he states, at p. 5 of the order (page 4 of the transcript) that Candace was under 55; even if she was over 55, she was up for the chop if under 59-1/2.

Candace’s plea that economic distress and hardship should exempt her from the 10% chop avails her naught.

STJ Lew catalogues five (count ‘em, five) cases that say that economic hardship doesn’t help. If you take too young, you’re hung.

“The long list of cases cited above, as well as many others decided by this Court to the same effect, strongly suggests there is a common misunderstanding among taxpayers that financial hardship is an exception to the imposition of an otherwise applicable Section 72(t) additional tax. Petitioner apparently proceeded under that misunderstanding not only with respect to the year here in dispute, but to several previous years as well. Given her explanation at trial, we are satisfied that petitioner had reasonable cause and acted in good faith with respect to the portion of the underpayment of tax resulting from her failure to include Section 72(t) additional tax in the tax liability shown on her 2012 return.” Order, at pp. 6 -7.

So Candace gets a bye on the negligence chop, and her actual deficiency, after STJ Lew gives her credit for some medicals she paid with the distribution (and medicals are OK), is under the five-and-ten radar.

STJ Lew is a judge with a heart, like his colleague, STJ Armen.

But Candace still owes the 10%.

I am using that term in more than one sense. Samuel D. Kelker, Docket No. 15061-14L, filed 10/24/16, claims Tax Court should act like an appellate court when it reviews CDPs from Appeals, and therefore should follow Fifth Circuit rules (Sam apparently is Golsenized to Fifth Circuit).

So we get this designated hitter from The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Irrefragable, Ineluctable, Indefatigable, Impeccable, Illustrious, and Incontrovertible Foe of the Partitive Genitive, and Old China Hand, Judge Mark. V. Holmes.

Sam’s Fifth Circuitry is short-circuited.

“This is just wrong. Section 6330(d)(1) gives us jurisdiction to review the IRS’s notices of determination that sustain its decisions to collect tax debts like Kelker’s through levies. Section 7453 gives us the authority to conduct cases in accord with rules of our own devising, and we have chosen to do so with our Rules of Practice and Procedure.” Order, at p. 1.

But Sam isn’t entirely wrong.

“Kelker is a little bit right that our function in CDP cases is largely an appellate one. Our job is to review the record that the IRS compiled in reaching its decision to try to collect Kelker’s taxes by levy. Sometimes a trial is necessary to figure out whether that record is complete or defective in some way, but in this case neither Kelker nor the IRS has identified any issue that needs to be tried. To get the record before us, the IRS usually (as it did here) attaches it to an affidavit of the IRS employee who conducted the CDP hearing. The IRS and the taxpayer can then move for summary judgment — and much like arguing in briefs to a circuit court — can argue in the form of motion papers that the IRS’s conclusion was correct or incorrect on that record.” Order, at p. 2.

There’s some argy-bargy about whether Sam got the SNOD when he didn’t pay the SFR, but Sam caved at the CDP, didn’t propose an collection alternatives, and just groused about underlying liability.

So Sam’s demand for a face-to-face and a trial are short-circuited by summary J.

I post this order to show the inventiveness of petitioners. Never a dull moment at 400 Second Street, NW.

But It’s Taxable

I’m borrowing the title of John Lennon’s 1967 message to the world to tell the story of Joseph L. Jackson and Sylvia A. Jackson, 2016 T. C. Sum. Op. 69, filed 10/24/16.

In the year at issue, Joseph L. “…was the pastor, a director, and the registered agent for Triumph Church of God (church).  Mrs. Jackson was also a church director.  The church had approximately 25 to 30 active members and as many as seven ministers and offered services three days each week.  Mr. Jackson had informed the church’s board of directors that he did not want to be paid a salary for his pastoral services but that he would not be opposed to receiving ‘love offerings’, gifts, or loans from the church.” 2016 T. C. Sum. Op. 69, at pp.2-3 (footnote omitted, but it might explain things, so see infra, as my high-priced colleagues say).

“For a discussion of the meaning of the term ‘love offering’, see Michael P. Mosher & Ryan K. Oberly, ’A Gift Not So Simple–Current Tax Issues Associated With ‘Love Offerings’, 24 Tax’n of Exempts 28 (July/Aug. 2012).  For present purposes, we understand that petitioners consider the term to be synonymous with ‘nontaxable gift’.” 2016 T. C. Sum. Op. 69, at p. 3, footnote 3.

Well, the loans were undocumented, so those go by the cliché.

And the “love offerings” might just be payment in lieu of compensation; but not salary or wages, since IRS doesn’t claim Joseph L. was an employee of the church or anyone else.

“In Commissioner v. Duberstein, 363 U.S. at 284-285, the Supreme Court stated that the problem of distinguishing gifts from taxable income ‘does not lend itself to any more definitive statement that would produce a talisman for the solution of concrete cases.’  The Supreme Court concluded that, in cases such as this one, the transferor’s intention is the most critical consideration, and there must be an objective inquiry into the transferor’s intent.  Id. at 285-286.  In other words, rather than relying on a taxpayer’s subjective characterization of the transfers, a court must focus on the objective facts and circumstances.  Id. at 286.” 2016 T. C. Sum. Op. 69,

None of the 25 or 30 active members come forward, and Joseph L. and Sylvia both testify that he told his board of directors that he would accept “love offerings” in lieu of pay.

Joseph L. is out of luck.

“Petitioners did not offer the testimony of any members of the congregation (including the other directors) or Ms. Simmons that would allow the Court to conclude that the transfers were anything other than compensation for services.  The frequency of the transfers and the fact that they purport to have been made on behalf of the entire congregation is further objective evidence that the transfers represented a form of compensation.  See Goodwin v. United States, 67 F.3d 149, 152-153 (8th Cir. 1995) (holding that substantial, ongoing cash payments collected from church congregation and transferred to pastor as ‘special occasion gifts’ constitute taxable income).” 2016 T. C. Sum. Op. 69, at p. 7.

So STJ Daniel A. (“Yuda”) Guy gives IRS the win and a Rule 155 beancount.

Or Nothing Is Better Than Something?

The visiting practices of readers to this blog is endlessly fascinating and thoroughly inexplicable. Swallows to Capistrano have nothing on my readers.

Yesterday I posted nothing. Yet the blog had 116 views.

Today I posted three (count ‘em, three) blogposts, and so far, as at 3:30 p.m. EST, my blog has garnered 47 views.

I have commented heretofore on this phenomenon.

As I asked then, “But why am I posting at all, when I could get more views if I shut up (as some have suggested)?”

I really must consider this question.

Whatever disagreements I may have with Ch J L. Paige (“Iron Fist”) Marvel, I want to be the first to praise her for bringing to the attention of the self-represented the counter to the IRS one-two punch I’ve often faulted heretofore.

For details, see, e.g., my blogpost “Fake Out – Part Deux,” 6/23/15.

IRS seems to like this move, bombarding the pro se taxpayer with stuff that looks like a SNOD, but isn’t, even though there’s no mandatory form which a SNOD must take, and after the pro se petitions, hits them with the real thing. By the time Tax Court has told the self-represented that the bombardment was a dud round, and therefore tosses their petition, the magic ninety days has run on the real thing, so tough luck.

I think my readers know I’m no fan of sneaky.

So here’s Alvin Hines, Docket No. 19440-16S, filed 10/21/16.

Apparently IRS muffed the mailing address for the SNOD, and wants to claim no jurisdiction for want of valid SNOD.

Ch J Iron Fist tips off Alvin.

“Petitioner is also reminded that if he should receive a new and properly addressed statutory notice of deficiency…, he should (within 90 days of the date of the notice) file a new and separate petition, in order to protect any statutory rights to dispute that notice.” Order, at p. 1.

Thanks, Ch J Iron Fist. This should be SOP. And how about the filing fee?

Law review writers and bloggers to the stars may wonder at my piecing together the refund mechanism (or lack thereof) in USTC for the sixty bucks for which the petitioner is mulcted, when his case is tossed (or when she folds).

I submit, however, that this is as important to the ordinary petitioner as the correct structuring of a multi-tier partnership is to those who retain demi-brigades of whiteshoes where in the financials the last six digits are omitted.

So here’s Albert L. Dunlap, Docket No. 20511-16SL, filed 10/20/16, who wants out of Tax Court but wants his sixty bucks back.

Ch. J L. Paige (“Iron Fist”) Marvel tells IRS’ counsel to give legal advice to an unrepresented.

“…at a reasonable and mutually agreed upon date and time, but no later than November 9, 2016, the parties shall confer as to petitioner’s Motion To Dismiss. Respondent shall undertake to discuss fully with petitioner the consequences to petitioner if the Court were to dismiss this case.” Order, at p. 1.

This is par for the course. See my blogpost “Assigned Counsel? – Part Deux,” 1/28/16.

But now comes the story. “…the Court’s $60.00 filing fee in the instant case is not refundable to petitioner. That filing fee covers the cost of processing this case. See I.R.C. sec. 7451.” Order, at p. 1.

But it didn’t for Ethel M. Stewart, and it did for Harold B. Rhoney. And it didn’t for Travis Strable & Elana Strable. See my blogposts “Now I’m Really Confused,” 9/27/16, and “Returns,” 10/18/16.

Maybe the answer is in the magic words of Section 7451. “The tax court is authorized to impose a fee in an amount not in excess of $60 to be fixed by the Tax Court for the filing of any petition.”

Tax Court is authorized, but maybe doesn’t have to.

OK, but if that’s discretionary, what are the guidelines? Maybe someone will move to vacate if they don’t get back their deposit, claiming denial is arbitrary and capricious.

And There Are Phonies

 Judge Chiechi finds that some phonies are less phony than others, and that sinks Michael Shamrock and Victoria Bigg, 2016 T. C. Memo. 193, filed 10/20/16.

Refresh your recollection with my blogpost “A Phony,” 1/30/15. The person in question, though admitted to the IL Bar, was on the inactive list because he didn’t pay his registration fee. And he told IRS via a Form 2848 POA, and told Tax Court in his Entry of Appearance, that he was a lawyer.

A mere nothing, says Judge Chiechi.

Judge Chiechi survived the motion to recuse, Mike’s & Vic’s new lawyer’s brilliant argument falls flat, and the former phony is lauded by Judge Chichi as having provided Mike & Vic “competent, valuable, diligent, and effective assistance,” 2016 T. C. Memo. at pp. 10, 73, 76, 77, 78, 80, 88, 94 and 95. I never saw any properly dues-paying lawyer so praised in any Tax Court opinion.

As IL law is involved, Seventh Circuit weighed in on the nonpayment suspension in a criminal effective-assistance case. “…persons who obtain [legal] credentials by fraud * * * are classes apart from persons who satisfied the court of their legal skills but later ran afoul of some technical rule. Lawyers who do not pay their dues violate a legal norm, but not one established for the protection of clients; suspensions used to wring money from lawyers’ pockets do not stem from any doubt about their ability to furnish zealous and effective assistance.” 2016 T. C. Memo. 193, at p. 64. (Citation omitted).

And he forgot to pay because of a personal tragedy.

I wish NY were so forgiving. And that Judge Chiechi had some kind words for attorneys who pay up. Here, in the Empire State, it’s a disciplinary offense not to pay up, however sad a tale you may tell. If it’s only a “whoops!” in IL, I wonder that any lawyer pays.

And I paid thirty (count ‘em, thirty) bucks for my admission to Tax Court. I feel silly. I could have gotten in for free, if I played my cards right.

“The entry of appearance form that Mr. N had provided to the trial clerk did not show a ‘Tax Court Bar Number’ in the appropriate place in that entry of appearance form that requires such a number to be shown. That was because Mr. N had not applied to be, and consequently was not, admitted to practice before the Court before the October 28, 2013 Chicago trial session commenced. As a result, the Court had not assigned a Tax Court bar number to him.” 2016 T. C. Memo. 193, at p. 40. (Name omitted).

No biggie. Mr N went right on giving Mike & Vic his ““competent, valuable, diligent, and effective assistance” notwithstanding.

Of course, the only reason Mike & Vic denounced Mr N.’s lapse from grace was the stip he entered made them pay more than they wanted. The new lawyer pointed out Mr N’s  minor registration deliction (amazing how few clients search the relevant websites when engaging counsel), and suggested a case that would save the day.

Except it didn’t. Mr N’s advice was as aforesaid above the price of rubies. Mike & Vic are stuck with their stip. And new lawyer, who presumably did pay and got properly admitted to USTC, barely escapes a Section 6673 chop.

Ya can’t make this stuff up.