Today’s offering, taken, if not ripped, from the Tax Court headlines, concerns Thomas L. Ryther, 2016 T. C. Memo. 56, filed 3/28/16.

And if you’re wondering why I’m not dealing with the 47 pages of Judge Laro’s deconstruction of John J. Machacek, Jr. and Marianne Machacek, 2016 T. C. 55, filed 3/28/16, it’s just a variation on Our Country Home Enterprises, Inc., 145 T. C. 1, and I dealt with that in my blogpost “Splitsville,” 7/13/15. If there’s anything new today, it’s Judge Laro marrying the SDLIA with deferred compensation (Section 83). And as these SDLIA deals have been blown sky-high so many times, it’s not likely any of my readers will encounter any new ones.

I know, I know…I’m a big fan of The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Impenetrable, Implacable, Illustrious, Industrious, Indefatigable, Ineffable, Ineluctable, Incontrovertible and Indomitable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes. Honest, I didn’t choose Tom ahead of the Machaceks because of Judge Holmes’ prose…well, not entirely.

But you should read this one, because it’s got a lot of good stuff on trade or business vs. liquidation of investment. Plenty of stuff for your trial briefs and summary J motions.

And of course we have Judge Holmes up to his old tricks: “In winding up Knight Steel’s operations, the trustee focused on the company’s cash and accounts receivable and chose to abandon the company’s few items of tangible property–a couple run-down trailers, some well-used fabrication equipment, and a large pile of scrap steel–because they appeared to be worthless.” 2016 T. C. Memo. 56, at pp. 2-3.

Hey Judge, here in the Apple it’s almost 4:30 p.m. as I write this: time for a cup tea and a piece cake?

Back to business. Tom was honcho of the aforementioned Knight Steel, and the post-Chapter owner of the aforementioned “couple run-down trailers” and the large pile of scrap steel.

Tom, needing cash and having apparently worthless stuff the Ch 7 trustee had scorned, discovered there was gold in that thar large pile. So he unloaded the scrap steel over seven years, never selling more than enough to raise cash to live on. And Tom dealt only in what certain former clients of mine, distinguishable by their distinctive dress, called “blätter.”  Incidentally, Tom also didn’t bother to file income tax returns for the seven (count ‘em, seven) years he was unloading, but came clean thereafter. Whereupon IRS hit him with a SNOD for SE tax, claiming he was in the scrap selling business.

No he wasn’t said Judge Holmes. And Judge Holmes, like a master cat herder, pores through a bushelbasketful of cases, which go in all directions.

While the scrap might have been stock-in-trade for the defunct Knight Steel, some caselaw from the estate tax side says that it might be a capital asset when it gets to Tom. And the day-trader and gambler cases say that even a lot of activity might not put you into a trade or business. True, you don’t have to advertise to sell scrap; there are apparently published pricelists and wide-ranging buyers who solicit sellers of scrap. But there’s no processing involved on the seller’s side, unlike the photo operation that scavenged waste silver from its developing vats, turned around and sold it.

So while a lot of the seven factors, and the three subsidiary factors, are neutral, on the facts Tom was liquidating an investment.

And size doesn’t matter. Big-ticket sales don’t put the seller into a trade or business. An art dealer selling off his personal collection got capital gains in one case.

And the number of years engaged in selling isn’t always dispositive. It was in the case of a seller of classic cars, but those are often held because their value appreciates with time, and such cars often need lengthy and extensive restoration. So the classic car dude was in a trade or business. But Tom’s scrap remained scrap and just sat there. Rusting, probably.

And my coop and condo converter clients might find solace in this tidbit: “We find this factor favors Ryther–that he decided to sell the scrap slowly over time instead of in one lump doesn’t make the sales a business, any more than liquidating a block of duplexes in a string of sales instead of all at once makes it a business.  See Heller Trust v. Commissioner, 382 F.2d 675 (9th Cir. 1967), rev’g T.C. Memo. 1965-302.).” 2016 T. C. Memo. 56, at p. 15.

Good stuff here, despite the “couple run down trailers.”

I don’t, but that’s not news.

And even though it isn’t a hot flash, Friday, April 15, 2016 is Emancipation Day in Our Nation’s Capital, thus bestowing its holiday largesse upon individual income tax filers and giving them until Monday, April 18, 2016 to file and pay, or seek extension and pay, their 2015 personal income taxes. And the extended ones have until October 17, 2016, to file their belated returns.

No extensions for payment, of course; penalties apply.

Today, March 27, 2016, marks the forty-ninth anniversary of my admission to the New York State Bar. It’s been a trip! Roll on the next forty-nine!

Back on June 30, 2015, I quoted The Weavers’ classic injunction to the union miner in part, in my blogpost “Keep Your Hand Upon the Dollar,” of even date therewith, as my high-priced colleagues would say.

Today the next line is in focus, as Ch J Michael B (“Iron Mike”) Thornton tells the story of Jonathan A. McCarroll & Rashelle McCarroll, Docket No. 23102-15S, filed 3/25/16.

But it’s not really the story of Jon & Rash. Unhappily for them, it’s the story of their trusty EA, hereinafter named, styled and denominated (again as my high-priced chums would say) as “BJ.”

BJ mailed in Jon’s & Rash’s petition, and used Stamps.com for postage. I’ll not comment further on Stamps.com, as I’ve discomposed enough electrons in the past thereupon.

Though BJ claims same was timely posted, the only USPS notation thereon was “Returned to sender. Returned for add’l postage $1.10″. Order, at p. 1.

Upon receipt, BJ fired the petition back (29 days late) with a note stating: “The enclosed paper work (sic) was placed in the mail and postmarked 8/13/15. Unfortunately it was returned to our office by the USPS indicating the package required additional postage.” Order, at p. 1.

I hate to see a fellow EA get the worst of it, but BJ is out, and so are Jon & Rash.

BJ’s original postmark was obliterated by Tax Court’s irradiation process, but enough was left to show that it was a dollar and ten cents short. Ch J Iron Mike, though about to leave the Chieftainship, still is a stickler.

“Although section 7502, I.R.C., allows a timely mailed petition to be treated as timely filed, that section mandates that the envelope bearing the petition be ‘postage prepaid, properly addressed to the agency, officer, or office with which the document is required to be filed.’. Sec.7502(a)(2)(B),I.R.C. The ‘postage prepaid’ element is thus an explicit statutory condition precedent for reliance on section 7502, I.R.C.” Order, at pp. 2-3.

And no sad tale, however tragic or lugubrious, cuts any of the Section 7502 ice in Tax Court.

“While the Court is sympathetic to petitioners’ situation and understands the unintentional character of the inadvertence here, the fundamental nature of the filing deadline precludes the case from going forward. As a Court of limited jurisdiction, the Court is unable to offer any remedy when a petition is filed late. Governing law recognizes no reasonable cause or other applicable exception to the statutory deadline.” Order, at p. 3.

Which brings me back to today’s headline. Not only must you keep your hand upon the dollar (or dollar and ten cents), you must also keep your eye upon the scale. The postage scale.

It’s appropriate that my fifteen hundredth (count ‘em, 1500!) blogpost should be a designated hitter from…drumroll…The Great Dissenter, s/a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Indelible, Irrefragable, Indefatigable, Illustrious, Indomitable, Ineluctable, and Incontrovertible Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes…cymbal clash…

And it’s our old friends claim preclusion and issue preclusion revisited, in Linda J. Martin & John A. Martin. Docket No. 11015-15, filed 3/24/16.

Lin & John claimed they settled out two tax years on the key issue raised in the latest go-round, the stipulated decision was entered, and so it’s res judiciata (that is, claim preclusion). Or “rees judy-cater,” as a professor remarked on The Hill Far Above, so long ago.

Judge Holmes: “And so it is — but only for their 2007 and 2008 tax years, not their 2009 and 2010 tax years that led to this case.” Order, at p. 1.

Every year is a brand-new year. What was decided in the past for a year no longer at issue doesn’t apply, except….

Don’t you just love exceptions? Makes my day.

“The doctrine that the Martins might plausibly invoke is collateral estoppel, which bars re-litigation of an issue that was tried and decided in a previous case. But ‘decided’ here means decided by a judge — they settled their earlier case and that means that they do not got [sic] the benefit of collateral estoppel.” Order, at p. 2.

Entering a decision off a stipulation is only a pro forma agreement to what the parties agreed.  It invokes neither claim preclusion nor issue preclusion.

It’s not the fifteen hundredth time I’m saying it; it only feels that way.

Stipulate, don’t capitulate.

This coming Sunday marks Anniversary 49 of my admission to the Courts of The Empire State. While I have not quite followed the words of the late great Woody Guthrie, it sometimes feels like “my poor feet have traveled a hot, dusty road.”

And here’s the name of one with whom I dealt on a deal on East 25th Street here in the Apple some thirty-six years ago, Earle Altman. It’s Annabelle Limited Partnership, Earle M. Altman, Tax Matters Partner, et al., Docket No. 17523-13, filed 3/24/16.

Earle claims he’s tax matterer for Annabelle and a sibling, but Judge Kerrigan finds Earle wasn’t. Earle might be a partner for FPAA purposes, but that doesn’t make him either tax matterer or notice partner. Earle’s individual name never shows up on the partnership list. But in reviewing all the documents, Judge Kerrigan finds that “”915 Broadway Realty Associates, C/O Earle Altman” is listed as tax matterer.

IRS says, ”dismiss for no jurisdiction, as Earle is neither tax matterer nor notice partner.”

Judge Kerrigan won’t do it.

915 Broadway Realty Associates was the TMP for the years at issue, Earle is TMP for 915, so Judge Kerrigan orders the caption amended to put in 915 and take out Earle, but Earle can, if he wishes, ratify the petition (blue ink, old man). If he doesn’t ratify, he’s out.

Another stroll down the hot, dusty road of Memory Lane.

No, not my fellow Phi Beta Kappa member Nathaniel Hawthorne’s 1837 short story collection, rather this is the story of Jason M. Scheurer, Docket No. 25308-14, filed 3/24/16.

Judge Lauber tells the story. J is trying to prove some partnership deductions passed through to him on the ordinary-and-necessary track, but IRS claims these were contributions to capital or loans. And there’s also the question whether J, Louis and Manny were partners carrying on a trade or business.

J claims he needs the testimony of Kevin Zinn, who ran an outfit with which J and partners did business. J also asks a wee bit late, although he did try on the trial to get Kev’s testimony in. It was ruled cumulative at the time; it would only prove (or not prove) what had already been proven (or not proven) by other testimony and documents.

J tries again. But there’s a hitch. Kev was in the slammer in MS when the trial took place last November. Kev has since moved to the Federal Correction Facility at Ft Dix, NJ.

As one who has visited Ft Dix (but not, definitely not, the Federal Correction Facility there, or anywhere else), I cannot recommend it to the tourist.

So J wants to get Kev’s testimony, and claims the Ft Dix guardians would let Kev talk. But four (count ‘em, four) months have gone by since the record was closed on the trial.

No, says Judge Lauber, Kev’s testimony does nothing.

“Reopening the record for the submission of additional evidence lies within the sound discretion of the Court. A court will not grant a motion to reopen the record unless, among other requirements, the evidence in question is not merely cumulative; the evidence is material to the issues involved; and the evidence probably would change the outcome of the case.” Order, at p. 2. (Citations omitted).

J had to keep records, and he claims he put in whatever he had. He had three witnesses testify about his business dealings. What Kev knows about how J’s alleged partnership worked doesn’t add to what has already been testified.

Besides, IRS already has done their post-trial brief. Taking Kev’s deposition would impose additional work on IRS, and nothing J has suggested Kev might say could justify doing that.

That’s the story of STJ Diana L. Leyden, who comes out of the Taxpayer Advocate role at the New York City Department of Finance (and man, do the New York City taxpayers need an advocate!), headed for the STJ platoon at 400 Second Street, NW.

STJ Leyden’s distinguished cursus honorum is available for inspection at http://ustaxcourt.gov/press/032416.pdf.

I have no doubt STJ Leyden will give the taxpayers a fair shake in Tax Court.

See my blogpost “Yes In Deed,” 7/15/12. Then read, and weep if you must, Bayne French and Christine French, 2016 T. C. Memo. 53, filed 3/23/16.

Judge Marvel has a word for the conveyancer, when dealing with the conservation easement.

State that the conservation easement deed embodies the entire agreement of the parties. Better still, drop the “good and valuable consideration” toxic boilerplate, and talk about how the grantors love the wide-open spaces and how they’re getting nothing but psychic satisfaction from the whole deal. Use the “no goods or services” language from Section 170(f)(8). Have grantor and grantee both sign and acknowledge.

Remember, without the “contemporaneous acknowledgment” from the donee, with all the magic language in it, no deduction.

Judge Marvel doesn’t even have to deal with whether Bayne and Chris actually owned what they claim they gave away, nor whether what they gave away (if anything) was worth what they claimed it was worth.

I’ll repeat what I said back in 2012, in the abovecited blogpost: “Note to dirt lawyers: Please don’t use boilerplate printed real estate forms for making a conservation easement. The old ‘ten dollars and other good and valuable consideration’ bargain and sale deed form, available at dime-store prices, might be good enough for a routine single-family house sale, but not for a big-time transaction with heavy-duty tax deductions on the table. Read the IRC; draft your language with great care. Have both grantor and grantee sign the deed. Use a proper integration clause.”

After Judge Marvel unloaded on Bayne and Chris, I wager someone is getting The Phone Call.

We get a short-and-sweet reprise of Rick Astley’s 1988 hit from Judge Foley, and it really helps Paul W. Grauer, 2016 T. C. Memo. 52, filed 3/22/16.

The issue, for you collection specialists, is the waiver of SOL, Form 900, fetchingly and tautologically entitled Tax Collection Waiver. IRS has one, and Paul is claiming SOL against an NITL thirteen years after Paul W. filed a return showing a balance due, which Paul didn’t pay.

Paul W. filed the Form 12153, and at the face-to-face CDP “…contended that a typographical error (i.e., the waiver’s ‘May 8, 20015’ expiration date) renders the waiver invalid; the waiver was not agreed to in connection with an installment agreement; and the period of limitation for collection relating to 1998 had expired before respondent issued the February 11, 2013, notice of intent to levy.” 2016 T. C. Memo. 52, at p. 3. I include the dates, because they’re relevant here.

Appeals gives Paul W. a NOD affirming the NITL, and Paul W. petitions.

IRS’ case rapidly becomes unglued.

IRS first claims this is a second NITL, and the only-one-swing-at-the-baseball rule applies. But then IRS concedes the account transcript, based upon which the first NITL is asserted, is wrong. So there is jurisdiction, and Judge Foley goes to it.

Paul W. claims he never entered into an IA, and Section 6502(a) links the Form 900 SOL waiver to an IA. Obviously, if there’s an IA, the clock is ticking while the taxpayer forks over the installments; if the taxpayer stops forking at any time, IRS has to be able to grab whatever wasn’t forked.

IRS forks over the Form 990 at the trial, but the IA to which it is referenced is nowhere to be found.

Judge Foley: “In fact, respondent’s [IRS’] only evidence that such an agreement exists is an account transcript that he concedes is inaccurate and an indecipherable and unconvincingly explained collection of numerical codes. Accordingly, we find that an installment agreement was not agreed to in connection with the waiver, and the 10-year period of limitation for collection has expired.” Order, at p. 5.

Paul W., time for a Section 7430 motion?