See my blogpost “Judge Gustafson’s Conundrums,” 6/2/15.

We know that Judge David Gustafson is obliging as can be. He instructs, will make housecalls to jails, and generally helps the stumbling pro se wherever he can. But his isn’t omniscient, and is the first to tell us so.

Here he is in Bradford G. Brown, Docket No. 28708-14L, filed 11/10/15.

Brad has lots of trouble. He’s bankrupt, and wanted to contest his tax liability, but was in the slammer at the time. In the meantime, the Ch 7 Trustee made a deal with the IRS that cut Brad’s liabilities, but Brad thought he could do better.

IRS wants summary J on Brad’s liabilities, claiming the bankruptcy deal between the 7 Trustee and IRS precludes Brad.

Brad claims “…the settlement letter indicated that he would have a final opportunity to submit documentation to reduce his tax liability at the hearing on the chapter 7 trustee’s motion to compromise controversy. He contends that he was not afforded that final opportunity because he was incarcerated at the time of the hearing on the motion to compromise controversy and that respondent has not located the bankruptcy court hearing transcripts that would show what the bankruptcy court decided or that he was given a final opportunity to present his documentation.” Order, at pp. 1-2.

Judge Gustafson wisely steps to the side. “This case involves bankruptcy issues as to which the undersigned judge is not expert, and we will order the parties to address several questions about that motion.” Order, at p. 1.

When Judge Gustafson gets a chance to ask questions, stand back, counselor. You’re in for an old-time South Carolina hayride (Judge Gustafson hails from Palmettoland).

So here goes.

“(1) What is the authority for the proposition that the bankruptcy settlement between the chapter 7 trustee and the IRS is binding on Mr. Brown?

(2) If the bankruptcy settlement is binding on Mr. Brown and the IRS, why has the IRS not abated that portion of Mr. Brown’s liability that exceeds the agreed-upon settlement amount?

(3) Does section 6330(c)(2)(B) preclude a liability challenge in this CDP proceeding if the Court finds that Mr. Brown’s incarceration prevented him from appearing at the hearing?

(4) Why has the IRS not credited the amounts that have already been paid by Mr. Brown’s bankruptcy estate against his liability as reflected on his account transcripts?

(5) Is the portion of Mr. Brown’s liability that was not satisfied through the bankruptcy proceeding (i.e., the unpaid general unsecured claim of $1,133,780.18) subject to a bankruptcy discharge by operation of 11 U.S.C. section 727?

(6) If the unpaid portion of Mr. Brown’s liability was not subject to a bankruptcy discharge, under what theory was it excepted from discharge under 11 U.S.C. section 523?” Order, at pp. 3-4.

Let’s see how IRS’ counsel navigates this one.

I had inquired, in a number of previous blogposts (links to which I’ll spare you), whether anyone reads this blog. My WordPress.com dashboard lists visits and views, but these seem chimerical; why anyone in Iraq or Afghanistan, not to mention residents of places even more distant, would care about US Tax Court and its doings, I have no idea.

But once in a great while I get an inkling that one of my screeds has struck home, even in the seats of the mighty.

One such came across my monitor today, as Ch J Michael B (“Iron Mike”) Thornton seems to have his recollection refreshed by my post yesterday, “See What You Get When You Stir The Silt,” 11/9/15.

He’d assigned the remand of Petaluma FX Partners, LLC, Ronald Scott Vanderbeek, A Partner Other Than The Tax Matters Partner, Docket No. 24717-05, to Judge Mark V Holmes. Read my post, and see why it might spark some recollection and second thoughts.

So today, we have this: “ORDERED that this case is no longer assigned to Judge Mark V. Holmes. It is further

ORDERED that this case is assigned to Judge Joseph R. Goeke for purposes of conducting any further proceedings pursuant to the mandate of the United States Court of Appeals for the District of Columbia Circuit, issued August 20, 2015.” Order, at p. 1.

Some coincidence, no?

You’ll remember The Judge Who Writes Like a Human Being, a/k/a The Great Dissenter, s/a/k/a the Implacable, Irrefutable, Irrepressible, Inflexible, Indefatigable and Illustrious Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes.

Well, his silt-stirring, to say nothing of his claim that Tax Court overruled Petaluma (see my blogposts “The Great Dissenter,” 12/28/11, and “Judge, He Didn’t Mean It,” 5/17/12) may come home to roost, as Ch J Michael B. (“Iron Mike”) Thornton has a surprise package for Judge Holmes.

Here’s the story, Petaluma FX Partners, LLC, Ronald Scott Vanderbeek, A Partner Other Than The Tax Matters Partner, Docket No. 24717-05, filed 11/9/15.

The Petaluma crowd are back from an unsuccessful trip to DC Circuit from which they were tossed back in August, DC Circuit deciding that a permanent reg trumped a temporary one and rendered the Petalumas quibbles insufficient to knock out the penalties which IRS laid on their Son-of-Boss sham basis-builder. Here’s the August decision from DC Circuit.

So back to Tax Court to fix the penalties.

And who gets the prize package from Ch J Iron Mike?

“…this case is assigned to Judge Mark V. Holmes for purposes of conducting any further proceedings pursuant to the just-referenced appellate mandate.” Order, at p. 1.

Stir that silt, Judge.

But even if they do, it’s no excuse for not filing timely. And stone walls do indeed a prison make for Robert Glenn McDougall, 2015 T. C. Sum. Op. 65, filed 11/9/15, who is incarcerated (and his motorhome and van seized, along with his records) during the year at issue.

Robert Glenn is also hit with some unreported income per W-2s he got from people he admitted working for, but claims he doesn’t remember them paying him. The items having come up on a third-party report, Section 6201(d) gives Robert Glenn a chance to dispute, with IRS having burden of proof.

But “don’t remember” don’t get it. CSTJ Panuthos: “We also note that section 6201(d) provides that in any court proceeding, where a taxpayer asserts a reasonable dispute with respect to any item of income reported on an information return and the taxpayer has fully cooperated with the Secretary, the Secretary has the burden of producing reasonable and probative information concerning the deficiency in addition to the information on the return. The key term in the foregoing sentence is ‘a reasonable dispute.’ This Court has concluded that a taxpayer does not raise a reasonable dispute for purposes of section 6201(d) merely by testifying that he is uncertain, cannot remember, or does not know.” 2015 T. C. Sum. Op. 65, at pp 5-6. (Citations omitted).

And it doesn’t get better for Robert Glenn. He seeks to duck late filing chop because he was in jail.

” Petitioner contends that he was unable to timely file his return and pay his tax because he was incarcerated and his business records were confiscated. This Court has previously concluded that incarceration at the time the return was due does not constitute reasonable cause for failure to timely file.” 2015 T. C. Sum. Op. 65, at pp. 8-9. (Citations omitted, but there’s a bushelbasketful of them).

So even if jail has fogged your memory, you still have to file and pay.

IRS is on the receiving end of this injunction from Judge Haines, in Steven T. Waltner & Sarah V. Waltner, Docket No. 12722-13L, filed 11/9/15. Steve & Sarah are old rounders, and I’ve blogged their various delictions, as more particularly bounded and described by Judge Buch, Judge Marvel and Judge Haines before now.

Today’s episode arises out of the facts and circumstances set forth in my blogpost “A Tale of Three Lawyers,” 7/3/14. Judge Haines was looking for grounds, if any, to impose a mulct on Steve’s & Sarah’s lawyer (whom I’ll call Donny). Judge Haines wanted IRS to tell him what Donny’s time-wasting tactics cost the Federal fisc, but to leave out “…costs incurred before petitioners’ counsel entered an appearance in this case or costs attributable to the issues of (1) whether the statute of limitations on assessment and collection applies in this case; (2) whether petitioners had unreported income from the sale of assets in Mr. Waltner’s Citigroup account; (3) whether petitioners are liable for an accuracy-related penalty under sec. 6662(a); and (4) whether petitioners are liable for an addition to tax under sec. 6651(a)(1).”

Well, IRS’ attorneys (who didn’t do so well before, as described in my abovecited blogpost) fail the test.

“Respondent [IRS] has provided generalized descriptions of the time spent by his attorneys, and it appears that such time may include time spent during the ordinary course of litigation. Respondent must provide a more detailed description of his attorneys’ time so that excess costs can be distinguished from costs ordinarily incurred during the course of litigation. If respondent cannot provide such information, we will be forced to make a reasoned determination as to the difference in the amount of time spent in this case and the amount of time ordinarily spent in litigating a section 6330 Collection Due Process case.” Order, at p. 1.

Subtext- Don’t expect as good a number from the Judge as you can provide for yourselves.

Or as they say when the UK pubs are closing, “Time, gentlemen, please.”

Today’s e-news for tax professionals from the crowd at 1111 Constitution Ave, NW, carries the following tidbit: “The Balanced Budget and Emergency Deficit Control Act of 1985, as amended, requires that whistleblower award payments issued under Internal Revenue Code section 7623 be subject to sequestration. For fiscal year 2016, awards paid to whistleblowers under Section 7623 on or after Oct. 1, 2015, and on or before Sept. 30, 2016, will be reduced by the fiscal year 2016 sequestration rate of 6.8 percent.”

Here is yet another masterful example of How Not To Do It. There is a massive tax gap: everyone knows it. Tax evasion is a national pastime that has long since outstripped night baseball and whatever else (or almost whatever else) people do at night.

Yet Congress, in its wisdom (if that is the right word), has elected to throw every imaginable stumbling block in front of those who would denounce the evaders, and bilk them of their reward.

Even when the whistleblower proceeds at the risk of his or her own life, their reward is a paltry.

As I said in my blogpost “The Whistleblower Blown Up,” 5/20/14: “If you try to help the IRS collect, and your information gets them $30 million they’d have had no way of getting otherwise, and you have to tell your life story in Tax Court (so there’s an opinion for the world to read), you’re risking your life, and your family’s life, for nothing.

“Great public policy, ya think?”

I’ve blogged enough Tax Court rejections to question seriously whether the whole program should not be abolished. Let the Ogden Sunseteers go find honest work.

The farce no longer imposes upon any but the most gullible.

Charlie Dickens (I’m tired of quoting him, I really am) got it right in 1858.

“This glorious establishment had been early in the field, when the one sublime principle involving the difficult art of governing a country, was first distinctly revealed to statesmen. It had been foremost to study that bright revelation and to carry its shining influence through the whole of the official proceedings. Whatever was required to be done, the Circumlocution Office was beforehand with all the public departments in the art of perceiving—HOW NOT TO DO IT.” Little Dorrit, Ch. X.

Judge Holmes Examines the Fifth

I’ll leave out the honorifics for Judge Mark V. Holmes, as today he has issued a blockbuster designated hitter.

Can asserting Fifth Amendment self-incrimination protection get you a Section 6702(a)(1) frivolity chop? Don’t say “of course” too fast, practitioner.

Check out Youssef Youssefzadeh, Docket No. 14868-14L, filed 11/6/15. I know you can’t cite orders, but check out Judge Holmes’ reasoning and the cases cited.

Yous’ return had all the financial info, except that the Schedule B interest and dividends had a payor redacted and apparently the item 7 magic foreign account or trust boxes unchecked. The totals were there, though. Yous wrote that spelling out the omitted info might subject him to criminal penalties.

IRS said “come clean or we’ll hit you with a frivolity chop.” Yous said no. IRS hit Yous with a NITL, and Yous petitioned. Since the Section 6702 chops aren’t assessable, Yous gets de novo as he never had a chance to contest, but however you slice it, Judge Holmes is finding for Yous.

And Yous makes a safe three-point landing to avoid the chop.

One, the return purports to be a return. Even IRS agrees it does.

Two, although it’s close, the return does contain enough information for IRS to see that Yous’ self-assessment is “substantially correct.” Note the magic adjective “substantially.” The return doesn’t have to be perfect. Yous didn’t file a blank return or put in all zeros, like the usual rounder-protester.

Judge Holmes: “He did black out the source and amount of some interest on Schedule B, but importantly, he included the total amount of interest on line 4. There don’t appear to be any other irregularities.

“The Commissioner argues that he needs the missing information to determine if Youssefzadeh’s return is accurate, but he fails to give any reasons why. And it’s important that the standard isn’t ‘Is the return completely correct?’ but ‘Is the return substantially correct?’ We hold that this return on these undisputed facts is — considering that the face of the return appears to include the total amount of interest while only redacting the source of one payer.” Order, at p. 3. I think you mean the name of the payer or the source of the payment, Judge.

Three, IRS plays the Notice 2010-33, 2010-17 I.R.B. 609 gambit. Citing the Fifth Amendment is frivolous on its face.

Here’s the Wet-Blanket Defense to the Notice 2010-33 gambit. “But Notice 2010-33 doesn’t say omitting some information because of fear of self-incrimination is frivolous; it says that omitting “all financial information” is frivolous. Id. (emphasis added). This distinction is important and appears elsewhere. The Internal Revenue Manual says it’s frivolous when an ‘individual makes an improper blanket assertion of the Fifth Amendment right against self-incrimination as a basis for not providing any financial information.’ I.R.M. 4.10.12.1.l (10) (emphasis added). The Manual goes on to say that ‘judicial precedents clearly establish that failure to comply with the filing and reporting requirements of the federal income tax laws will not be excused based upon blanket assertions of’ the Fifth Amendment. I.R.M. 4.10.12.1.2(6) (emphasis added). A review of Youssefzadeh’s return reveals that it contains plenty of financial information and isn’t covered by any blanket assertions.” Order, at p. 4.

Of course the IRM isn’t binding upon IRS nor does it confer any rights on taxpayers, but it’s surely a good argument.

But what about those judicial precedents the IRM talks about?

Judge Holmes will tell you. “The Supreme Court held a long time ago that the Fifth Amendment doesn’t excuse a complete failure to file a tax return. United States v. Sullivan, 274 U.S. 259, 263 (1927). But the Court went on to say in the same opinion that if the form ‘called for answers that the defendant was privileged from making he could have raised the objection in the return.’ Id. It later specifically held the privilege does apply to tax returns, provided the taxpayer affirmatively claims the privilege on the return and does so before he files it. Garner v. United States, 424 U.S. 648, 656 (1976). The Commissioner’s assertion without further analysis that a claim of the Fifth Amendment privilege on a return must in all cases be frivolous is simply wrong.” Order, at p. 4.

But just claiming the Fifth at random for one item doesn’t work. Yous has to show he has reasonable cause to fear a real and substantial hazard of incriminating himself. And the Courts look at the nature of the item on the return to which Yous has demurred. If the Court can’t think Yous has a real and substantial hazard looking at the item, Yous has to prove he does, without spilling so many clichés that he sends himself to the slammer.

Yous pulls it off. Yous has got FBAR troubles, offshore account(s) he maybe hasn’t OVDI’d out of.

“Youssefzadeh correctly tells us here that 31 U.S.C. § 5314 and 31 U.S.C. § 5322 make it a crime to willfully fail to file an FBAR. The questions asked on Section B of the Form 1040 elicit information that can easily be used to determine if the taxpayer has filed an FBAR. And, as the Sixth Circuit pointed out, ‘this section of the return refers taxpayers to a booklet that further outlines their responsibilities for reporting foreign bank transactions. This booklet discusses the duty to file [the FBAR].’ United States v. Sturman, 951 F.2d 1466, 1477 (6th Cir. 1991). Because the lines that Youssefzadeh redacted ask for information that triggers the duty to file an FBAR, and because willful failure to file an FBAR is a crime, we hold that Youssefzadeh has shown us a real and appreciable danger of self-incrimination by being compelled to answer the questions on Section B. In other words, Youssefzadeh’s return wasn’t frivolous by reason of invoking the Fifth Amendment privilege. Because the Commissioner raised no other grounds for imposing the penalty, we hold that Youssefzadeh’s return wasn’t frivolous or made with an intent to impede the administration of the code.” Order, at p. 5. (Footnotes omitted).

Note that IRS blew yet another gambit, by failing to raise intent to impede administration. That would make an interesting coda.

A Taishoff “good job, first class” to Yous’ trusty attorney, Edward M. Robbins Jr., Esq., of Beverly Hills, CA.

No, not me, STJ Lewis (“The Name Correctly Spelled”) Carluzzo, in a designated hitter on a day when good blogfodder is in short supply. Not much of a big noise on Guy Fawkes’ Day, for my UK readers.

The designated hitter is Wayne D. Ramsey, Docket No. 15959-14, filed 11/5/15.

Wayne D. wants STJ Lew to take judicial notice of his two Forms 1040X for the year in dispute, and he attaches these to his motion papers.

No can do, says STJ Lew.

“Although the parties may ultimately agree upon petitioner’s… Federal income tax liability and deficiency, if any, establishing those amounts by judicial notice as requested in petitioner’s motion is not appropriate. Only facts that are not subject to reasonable dispute may be judicially noticed. See Rule 201(b), Federal Rules of Evidence; I.R.C. §7453.” Order, at p. 1.

But there is a dispute. The petition and answer show the parties dispute Wayne D.’s liability, and nothing since the time for pleadings or amendments thereto has closed shows the parties resolved the dispute.

So go fight it out, guys. Or settle.

Although his/her name is not mentioned in Eric Edward Chandler, 2015 T. C. Memo. 215, filed 11/4/15, and EE is pro se in this one, EE’s now-or-former attorney is my kind of lawyer.

EE offered an OIC of $2938 against tax liabilities exceeding $600K, claiming collectability. But EE is a long-time rounder.

Judge Lauber: “Petitioner has been a frequent visitor to this Court. This case involves his Federal income tax liabilities for 1988, 1989, 1990, 1991, 2005, and 2008.” 2015 T. C. Memo. 215, at p. 2 (Footnote omitted, but it details EE’s prior interfaces with Tax Court, all of which he lost).

EE now claims he was diagnosed with cancer, and his medical expenses went from $144 to $310 per month.

But during three of the years at issue, EE drew $400K from his retirement accounts, and was evasive about what he did with it when speaking to the SO (who rejected EE’s OIC and EE rejected the SO’s short-term deferred payment offer). But he sure didn’t pay his income taxes with any of it.

Looks like dissipation of assets, no? It did to the SO and Judge Lauber. And dissipated assets get hauled back into RCP.

So Judge Lauber sustains the rejection of the OIC and sustains the NFTL.

But the good part is EE’s trial testimony. It must have endeared EE to Judge Lauber.

“When questioned at trial about his retirement account withdrawals, petitioner testified that his lawyer had advised him to withdraw the money and ‘just go spend it.’ He testified that he spent this money ‘on anything and everything’; that he had no records of what he spent the money on; and that he simply ‘had a good time.’” 2015 T. C. Memo. 215, at p. 6.

With pardonable restraint, Judge Lauber repeats EE’s jolly admission.

“The SO gave petitioner multiple opportunities to explain how he disposed of the funds he withdrew from his retirement accounts…, but he made no effort to do so. His testimony at trial that he ‘had a good time’ spending the funds on ‘anything and everything’ would not support the conclusion that the assets in question were expended for essential living expenses. We find that the SO did not abuse her discretion by treating petitioner’s retirement account withdrawals as ‘dissipated assets’ and rejecting his OIC for that reason.” 2015 T. C. Memo. 215, at pp. 9-10.

Gotta love EE’s attorney. I wish I could give my clients that kind of advice.

Trudging through Tax Court orders seeking the odd gem to blog is wearisome, but sometimes one feels a wave of pity for those entrapped by the IRC and the Tax Court’s Rules.

Here’s that horsey litigant (and winner) Denise Celeste McMillan, Docket No. 3720-12, filed 11/3/15. You’ll remember Denise won back in June. You don’t? Then re-read my blogpost “Who Would These Burdens Bear,” 6/12/15.

So Prevailing (or Prevalent?) Denise wants her legals and admins per Section 7430.

She doesn’t get them, and Judge Halpern is here to tell you why.

“Rule 231(a)(2)(A), Tax Court Rules of Practice and Procedure, provides that a taxpayer claiming litigation and administrative costs, where no agreement as to taxpayer’s entitlement to such costs exists, must file a motion with the United States Tax Court within 30 days after the service of a written opinion determining the issues in the case. T.C. Rule 231(a)(2)(A). Petitioner filed the motion more than 30 days from the date the written opinion was issued in this case. We issued our memorandum opinion in this case on June 11, 2015. Petitioner had until July 11, 2015, to file her motion. Petitioner filed the motion on September 25, 2015, which is 106 days from when we issued our memorandum opinion. Accordingly, the motion is not timely. Petitioner’s citation to 28 U.S.C. section 2412(d)(1)(B) is inapposite, in that 28 U.S.C. section 2412(e) expressly excludes from its coverage ‘any costs, fees, and other expenses in connection with any proceeding to which section 7430 of the Internal Revenue Code of 1986 applies’.” Order, at pp. 1-2.

And here’s an even sadder tale, Wayne Robert Wilson, 22626-14SL, filed 11/3/15. The Judge With a Heart, STJ Armen, tried to help Wayne Robert, who is in dire straits, but the Judge’s helping hand didn’t satisfy Wayne Robert.

Back in August, STJ Armen remanded Wayne Robert back to Appeals. Appeals gave Wayne Robert a CNC NOD. Wayne Robert is not thrilled, however, even though IRS’s hand is stayed. He writes to STJ Armen.

“Judging from petitioner’s letter…, it is hard to know whether petitioner regards currently-not-collectible (CNC) status satisfactory. Clearly the import of the petition and other filings by petitioner is that he is in dire financial straits and is unable to pay his assessed liabilities for the years in issue. One might therefore think that he would be pleased to know that levy action is suspended while his account is in CNC status and that he ‘would not be required to make periodic payments, other than refund offsets from Federal and State Tax Returns, while the account is classed as such.’ After all, petitioner implies that he would pay his liabilities if his financial situation were to change dramatically for the better. In any event, petitioner’s concern that CNC status ‘does not resolve anything, plus it adds a lien against me’ would appear to be inaccurate in that the instant case involves a proposed levy and, as far as the record reveals, no notice of Federal tax lien has been filed to date. Further, petitioner’s hope for tax relief in the form of income averaging is unavailing in view of the fact that income averaging was repealed from the Internal Revenue Code many years ago and, in any event, was designed to ameliorate rapidly increasing income and not the converse (which seems to have been petitioner’s situation).” Order, at pp. 1-2.

I lamented the end of income averaging, as for many years before and after my income varied widely from year to year. But income averaging died with advent of the celebrated Internal Revenue Code of 1986.

So STJ Armen has no further means of facilitating a “quick and simpler path to resolution” of Wayne Robert’s problem. Back to the trial docket goes Wayne Robert.