But Octavia saves the day for Felix Guralnik, 146 T. C. 15, filed 6/2/16.

Felix gets an assist via a brief amicus from the Harvard Federal Tax Clinic. I guess Ted Cruz wasn’t in that part of the law school; but this is a non-political blog.

And Octavia isn’t a person. Octavia is a snowstorm that shuttered the doors at 400 Second Street, NW, on February 17 last year. And February 17 was the last day for Felix to petition from the NOD that bounced Felix’s CDP.

Unhappy Felix (Felix is Latin for “happy,” btw) used FedEx First Overnight to deliver said petition to the Glasshouse. And y’all will recall my blogpost “Bless ‘Em All,” 10/14/14, wherein I asked IRS to enlarge the list of the Blessed Overnighters.

FedEx First Overnight was not then among the blessed communion, fellowship divine. It did make the team three months after Felix sent in the petition, but Back to the Future doesn’t work in Tax Court. So Felix handing the packet to the person in purple and black within the thirty-day window availed him not, as far as Section 7502 mailed-is-filed is concerned.

The Judge With a Heart, STJ Armen, got IRS’s motion to dismiss for want of jurisdiction, and, true to form, denied it. See my blogpost “Blow, Blow, Thou Winter Wind – Part Deux,” 8/24/15.

IRS disagreed, and threw the challenge flag.

Judge Lauber, writing for the unanimous Court, upholds the ruling on the field. I wonder if IRS gets charged a time out.

“Civil Rule 6(a)(3)(A) provides that, ‘if the clerk’s office is inaccessible * * * on the last day for filing * * * , then the time for filing is extended to the first accessible day that is not a Saturday, Sunday, or legal holiday.’  Rule 25(a) of our Rules, dealing with computation of time, does not address how time shall be computed when the Clerk’s Office is inaccessible.  Rule 1(b) of our Rules does, however, provide:  “Where in any instance there is no applicable rule of procedure, the Court or the Judge before whom the matter is pending may prescribe the procedure, giving particular weight to the Federal Rules of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand.” 146 T. C. 15, at p. 4.

There is no drop-box at 400 Second Street, NW. And petitions can’t be filed electronically.

So the Glasshouse was in fact “inaccessible.”

Harvard wants to claim equitable extension, but they cite to Article III court authority. Poor l’il ole Tax Court is an Article I court, which lives and moves and has its being through an act of Congress. The thirty-day barrier cannot be moved one nanometer by all of Harvard’s piety and wit; it’s got Tax Court holdings going back to 1924 butressing.

Harvard isn’t through. First Overnight is a better service than the previously-blessed ones, so it should be deemed blessed, even though Doug Shulman missed that one.

Judge Lauber is unimprerssed.

“Although petitioner’s argument has some common-sense appeal, we are unable to accept it.  Our prior opinions held the ‘timely mailed, timely filed’ rule unavailable, not because the private delivery service the taxpayer used was somehow inferior, but because that service had not been ‘designated by the Secretary.’  Sec. 7502(f).  The fact that a new service is more expedited than a previously-designated service, while perhaps important to the customer, is not dispositive for the Secretary.  For example, the Commissioner requires, as a condition of designation under section 7205(f)(2), that ‘[t]he delivery service offered must provide for delivery to all street addresses within the United States to which documents and payments subject to § 7502 must be sent.’  Rev. Proc. 97-19, sec. 4.04, 1997-1 C.B. at 645.  No matter how fast and expensive a new service is, the Secretary may decline to designate it under section 7502(f) if it does not satisfy this (and other specified) requirements.” 146 T. C. 15, at pp. 17-18.

Well, says Harvard, make the later designation of First Overnight retroactive. As Professor Tom Lehrer sang, “Fight Fiercely Harvard, Fight, Fight, Fight.”

No, says Judge Lauber, Section 7508 says when the Sec’y decides on retroactivity, and here he didn’t.

And the shutdown of DC for Octavia wasn’t a “legal holiday,” because the Mayor made an executive order using her emergency powers; she didn’t declare a legal holiday, as she could have done using another part of the DC Code. And if she had, every act required to be done “from every battlefield and patriot grave to every living heart and hearthstone all over this broad land” would be set back a day, because legal holidays in DC don’t count for any Tax Court related act anywhere.

While all the arguments are reasonable, they don’t cut it.

Except the FRCP Rule 6 argument. Felix, you’re in.

I wrote recently about the cost of writing fiction about oneself; see my blogpost “Fiction Writing Costs Money,” 5/24/16.

But today, I turn to the costs of fiction writing on behalf of others, at the suggestion of Judge Gale in James A. Ericson and Rebecca A. Ericson, 2016 T. C. Memo. 107, filed 6/1/16.

IRS tries to nail Jim and Becca for unreported income, but it turns out they didn’t underreport all that much, and Judge Gale reckons that their nonexistent recordkeeping was to blame. Their deductions likewise founder on Section 274, even when they might have scaled the Cohan fence if their numbers were better. Three years were on the table per the SNOD, but two were barred by SOL, unless IRS could show fraud.

IRS wanted fraud, but can’t prove it. Clear and convincing, y’know, and IRS trial counsel didn’t have the goods.

But why is IRS after fraud, when there isn’t big money on the table?

Jim was a freelance tax preparer. And thereby hangs the cliché.

“At the time of trial, Mr. Ericson had operated a tax-related business for at least the past 30 years, preparing tax returns as part of that business for at least the last 20 years.  He became interested in preparing tax returns after taking college courses covering the concepts of income and of deductible expenses.  He later attended some seminars and established his tax preparation business shortly thereafter.  He read books on tax laws during the first four months of his business and then began preparing tax returns through his business.  During one of his business’ initial years, he maintained a second job working for a certified public accountant helping her prepare her clients’ tax returns.  During some of his business’ other years, he maintained a different second job, working as an accountant first for a construction company and later for a windsurfing company.

“Mr. Ericson prepared approximately 700, approximately 850, and over 1,000 Federal income tax returns for his clients during [the years at issue].” 2016 T. C. Memo. 107, at p. 5.

So? Often the shoemaker’s children have no shoes. Preparers often do what they’d berate their clients for doing.

Except.

The RA who audited Jim and Becca was also checking out the returns of Jim’s tax prep clients.”Mr. V’s examination of the client returns stemmed from complaints the IRS had received from local tax practitioners concerning returns they had become aware of that Mr. Ericson prepared.  Mr. V initially reviewed approximately 30 client returns and selected approximately 15 for examination.  Mr. V concluded after examining the 15 client returns that they tended to have at least one questionable Schedule C and oftentimes inflated employee business expenses and unallowable education credits.

“Mr. V concluded from the examination of the approximately 15 returns that Mr. Ericson was a ‘problem return preparer’.  As a consequence, Mr. V examined petitioners’ returns for the years at issue.” 2016 T. C. Memo. 107, at pp. 22-23. (Name omitted.)

So?

IRS trial counsel introduced evidence as two clients and two years’ worth of their returns, and none thereof were sufficient to show that Jim was a fraudster.

Maybe the complaining preparers were miffed that Jim was taking business from them. And the best they and Mr. V could turn up only established that Jim was a wee bit casual in sweating his clients and a wee bit trusting in believing what they told him.

Except.

“In reaching our conclusion concerning the probative value of the client returns that are in evidence, we are mindful that in February 2015 a U.S. District Court permanently enjoined Mr. Ericson from acting as a paid Federal tax return preparer.  See United States v. Ericson, No. 13-00551 (D. Haw. filed Oct. 23, 2013) (orders of Feb. 20, 2015, and Nov. 30, 2014).  The District Court granted summary judgment on most of the Government’s claims, and a permanent injunction, on the basis of considerably more extensive proof concerning Mr. Ericson’s return preparer activity.  See id. That additional activity is not a part of the record in this case, and we reach our decision on the basis of the record before us.” 2016 T. C. Memo. 107, at p. 39, Footnote 8.

No issue preclusion? Apparently IRS counsel didn’t argue the point very well.

But it seems the snitches were right, and they got Jim ousted as a preparer.

Writing fiction for others can be even more expensive than writing fiction about yourself.

No, not the 1933 Jerome Kern-Otto Harbach ballad, most famously reprised by The Platters in 1958. Rather, this is another trip into the Section 280E minefield, as IRS seeks partial summary J in Patients Mutual Assistance Collective Corporation d.b.a. Harborside Health Center, et al., Docket No. 29212-11, filed 6/1/16.

And Happy Palindrome Day.

But there are obstacles to each of the three issues IRS wants precluded.

And who better to throw obstacles in the way of a craftily-crafted motion for summary J than The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Indomitable, Indefatigable, Ineluctable, Irrefragable, Incontrovertible, Illustrious and Impeccable Foe of the Partitive Genitive, His Honor Judge Mark V. Holmes?

As is well-known, I’m a great fan of motions for summary J. Even in the Branerton-saturated world of Tax Court discovery, not everyone always plays nice. And motions for summary J are far cheaper than depositions, and more efficacious than interrogatories and document demands. Let both sides lay whatever cards they’ve got on the table. Then let the Judge tell us what’s relevant.

Now let’s get to the smoke. In this case at bar, the smoke derives from plantlife whose chief isomer is (−)-trans-Δ⁹-tetrahydrocannabinol, the which is released in vaporized form and inhaled, strictly for medical purposes, of course.

The Patients want to include indirect costs of said plantlife in inventory per Section 263A. IRS wants summary J that the Patients can’t. But the desired finding requires determining whether Patients had more than one trade or business, and whether they purchased or produced the plantlife at issue.

IRS also want Judge Holmes to find that the Patients, individually, or as their name suggests, collectively, engaged in the sole trade or business of pushing (or more politely, trafficking in) boo, and therefore get no deductions per Section 280E.

But singularity vs multiplicity depends on an open-ended review of factors.

“These are not necessarily even the familiar factors of section 183, which do not apply in cases where the taxpayer is a corporation, Sec. 1.183-1(a), Income Tax Regs., and are hotly contested here where petitioner sold at least some non-marijuana products and also argues that it bundled enough services with its marijuana sales to make it not exactly a trade or business that — to use the verb of section 280E – ‘consists of’ trafficking in controlled substances. We also note that the only affidavit attached to respondent’s motion is from one of his attorneys who depends for his description of petitioner’s business on an interview (possibly not even done by the attorney — the affidavit uses the circumlocution ‘Respondent interviewed’) with someone described as petitioner’s employee. This is pure hearsay of course and cannot support summary judgment.” Order, at p. 2.

And as for production vs purchase, the Patients have an affidavit from one who claims at least some of the goods were owned by the Patients when grown.

But this proves the point. This is where to make points with the Judge, see what evidence the other side is going to try to use, and what they’ve got to counter your evidence.

And it sets up a good footing for a CTJ moment with the client.

If I ever attended the ceremony inaugurating a change of command, it has escaped my aging memory. Notwithstanding the foregoing, I have a vague recollection of much saluting, and persons of exalted rank and station (far above such rabble as I) telling one another what fine fellows they were.

And some might have been. I never made their acquaintance.

But Tax Court is different. Ex-Ch J Michael B. (“Iron Mike”) Thornton passed the gavel to Ch J L. Paige Marvel (byname to be determined; contributions accepted, but no compensation if any is chosen) in what seems a seamless transition.

Hail to the Chief.

I remember, so clearly the old cliché about as-if-it-were-yesterday almost has meaning, those waning days of October, in a year so long ago, when I shouted at every opportunity “Short!” And that magic moment when the mimeographed yellowed sheet (it was that long ago that photocopying was reserved for the highest echelons) came into my hands, and I exultantly screamed “FIGMO!”

There are no longer such moments. “Gone, alas, like our youth, too soon.”

If all this is gibberish to you, my condolences. Explanations merely dilute and trivialize.

Tomorrow comes the change of command ceremony, as Ch J Michael B (“Iron Mike”) Thornton passes the Chieftain’s gavel to Judge L. Paige Marvel. I’ll publish my reflections thereon tomorrow.

But today, Ch J Iron Mike shows how I felt in that sandy spot beside the South China Sea.

Here is Steven P. Stewart, Docket No. 7133-16S, filed 5/31/16.

“Upon due consideration of the Notice of Intervention by Courtney Ira…, it is

“ORDERED, that the caption of this case is amended to read “Steven P. Stewart, Petitioner and Courtney, Intervenor v. Commissioner of Internal Revenue, Respondent.” Order, at p. 1.

FIGMO.

I can hear the adenoidal snarl of the late great Conrad Veidt, as he leers at Hans Conreid and Ingrid Bergman, and Claude Rains gives us one of his ambiguous smirks. That was when they made movies….

Enough nostalgia.

But I daresay the conversation will be a trifle one-sided, as IRS doesn’t object to Joseph A. Insinga, Docket No. 9011-13W, filed 5/27/16 taking his own deposition.

And either that Obliging Jurist Judge David Gustafson isn’t a cult-movie fan, or he eschews the sort of wit that drew Judge Posner’s rebuke to Judge Wherry, as to which see my blogpost “There Goes the Neighborhood,” 9/3/13.

No, Judge Gustafson dryly orders “…petitioner’s application is granted and that, pursuant to Rule 81(b)(2), petitioner is authorized to take the deposition as requested.” Order, at p. 1.

I’ve blogged Fighting Joe’s fight a lot, but it’s instructive.

It’s getting late on a Friday afternoon, and even IRS E-Services’ Transcript Delivery System, TIN Matching and e-file Application is shutting down for the weekend. But there’s one last designated hitter to blog before I head off for a piña colada.

Joseph N. Ryan, Docket No. 13473-15L, filed 5/25/16, got a letter from Social Security Administration that would lighten any old-timer’s heart. “”Recently I discovered a sentence in my Social Security award letter -(copy enclosed, with the sentence highlighted), stating that I may keep ALL of my benefits – no matter how much I earn.” Order, at p. 2.

Well, Joe never paid tax, and didn’t petition the SNOD. When Joe got the NITL, he asked for a CDP, and was told that, although he can keep it, it’s still taxable.

STJ Armen, The Judge With a Heart, gives Joe the bad news.

“…it is clear that his argument is unavailing because he misunderstands the meaning of the Social Security benefit statement that he so heavily relies on. The statement deals only with what happens when a worker continues to work while receiving Social Security benefits. In other words, depending on a worker’s age, the worker’s Social Security benefits may be reduced if the worker earns above a prescribed amount; however, after attaining a certain age a worker will receive the worker’s full benefit regardless of the amount earned. In short, the Social Security benefit statement that petitioner relies on has nothing to do with the taxability of Social Security benefits; indeed, the word ‘tax’ or ‘taxable’ does not even appear. Rather, section 86 of the Internal Revenue Code determines the extent to which Social Security benefits may be taxable.” Order, at p. 5.

Sorry, Joe, you have to pay tax on Social Security. Welcome to the club.

Remember James W. Blackbourn, II & Angel M.  Blackbourn? No? Well, check out my blogpost “It’s Payback Time – Part Deux,” 1/28/16, wherein STJ Lewis (“Our Name Is Our Fame”) Carluzzo rejected Jim’s and Angel’s First Time Home Buyer Credit, First Edition, for their Canton cantonment, but asked IRS to play nice and credit Jim and Angel for the paybacks they made for the credit they now have lost ab initio.

But the Rule 155 beancount STJ Lewis ordered apparently got stalled, because IRS wants more time to spill the beans.

Well, not only is that not going to happen, but STJ Lewis spurs the parties on to the finish line.

It’s found in James W. Blackbourn, II & Angel M. Blackbourn, Docket No. 5964-12S, filed 5/27/16.

And STJ Lewis gets right to the point.

No more time, and “…the decision entered in this case will reflect the amount of the deficiency shown on the computation for entry of decision first received from either party.” Order, at p. 1.

I bet this race is more exciting than the Preakness.

Although his cursus honorum on the Tax Court website doesn’t state his undergraduate major, it may have been physics, because STJ Lewis (“Honor That Name”) Carluzzo is a real fan of the uncertainty principle. See my blogpost “The Uncertainty Principle,” 1/30/13.

And today it defeats IRS’s move for summary J in Ronda Robinson, Docket No. 1417-16SL, filed 5/26/16.

Ronda claimed at her CDP she never got the SNOD that gave rise to the collection action she’s fighting, so she wants a chance to fight on the merits.

IRS ripostes that they mailed the SNOD and it came back “unclaimed.”

Sounds open-and-shut enough not to merit a designated hitter, but STJ Lew has a point to make.

“…nothing in respondent’s [IRS’s] motion suggests that petitioner received the notice, or deliberately refused to retrieve it from the post office.” Order, at p. 1. (Citation omitted.)

So STJ Lew is not so sure he agrees with IRS that Ronda is out on contesting liability.

Remember, a late petition from a received SNOD, or a claim the SNOD wasn’t received, doesn’t work in a deficiency proceeding if IRS can prove mailing to last known address, or willful failure to claim the SNOD from USPS.

But in a collection proceeding, non-receipt, if credibly asserted, might carry the day. See Section 6330(c)(2)(B).

No summary J for IRS.

He who would petition, though he were dead, should make sure his personal representative checks the mail at his last known address, or shoots IRS a Section 6903 notice by certified mail of his representativeness forthwith.

That’s the moral from Estate of John A. Massie, Deceased, John Stephen Massie, Executor, Docket No. 5961-16S, filed 5/25/16.

John Stephen petitioned a SNOD directed to the late John A., attaching his appointment as executor.

IRS claims John Stephen is late, as the SNOD was “most likely mailed to the decedent’s address….” Order, at p. 1.

But “most likely” doesn’t cut it for Ch J Michael B (“Iron Mike”) Thornton in the waning days of his Chieftainship.

Turning to John Stephen, Ch J Iron Mike wants John Stephen to dish about the late John A.’s date of death, whether John Stephen notified IRS that he was the executor, and if he did, when, and send in a copy of the notice he gave IRS.

Executors, be warned. Check out Section 6903 and the Regs, and fire off that notice. Check out Form 56 and the instructions thereto.