Once again we examine the magic date when a debt is deemed uncollectible, thereby relieving the debtor of the indebtedness and sparking a Form 1099-C. But here is the difference: what effort is appropriate to ascertaining that date?

Nothing particularly new in this T. C. Memo, Patricia D. Clark, 2015 T. C. Memo. 175, filed 9/9/15. The issue is whether an identifiable event occurred manifesting that efforts to collect the debt were abandoned.

There’s more on this subject in my blogpost “Sunk by the Navy?” 9/28/11. Judge Cohen cites the Kleber case in this opinion.

Pat defaulted on her auto loan, the car got sold for less than the outstanding balance plus collection fees, the note was sold, and five (count ‘em, five) different collection agencies tried (or maybe didn’t try too hard) to collect from Pat.

Finally, the note holder unloaded a Form 1099-C on Pat, but it came back “undeliverable.”

IRS unloaded a SNOD on Pat, for $1,472.00. And thereby hangs the tale.

Pat claims the debt became uncollectible years before the creditor unloaded the 1099-C.

“There is a rebuttable presumption that an identifiable event has occurred during a calendar year if a creditor has not received a payment on a debt at any time during a testing period ending at the close of the year. Sec. 1.6050P- 1(b)(2)(iv), Income Tax Regs. The testing period is generally a 36-month period.” 2015 T. C. Memo. 175, at p. 7.

Of course, rebuttable presumptions are made to be rebutted.

IRS claims the engagement of the five (count ‘em, five) collection agencies shows that collection activities kept going on until the year when the 1099-C was unloaded.

But IRS falls short.

Judge Cohen: “ While respondent has established that collection agencies were engaged, the evidence does not demonstrate what, if any, collection activities they undertook. Respondent has therefore failed to provide any evidence of any significant, bona fide activity that would indicate an active creditor and thus has failed to rebut the presumption that an identifiable event discharging petitioner’s debt occurred….” 2015 T. C. Memo. 175, at p. 9.

Which gives rise to the title of this blogpost. How much time and effort would it take to amass evidence of all the collection activities undertaken by these agencies (assuming that they were still in business and had their records available), and provide such evidence in admissible form?

If this problem were posed to a private law firm, they might well ask whether, whatever effort was required, was it worth expending for a $1,472.00 claim?

Not quite Cyndi Lauper, but echoing her signature song, is The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Imperturbable, Irrefrangable, Indefatigable, Inimitable, Incontrovertible and Incomparable Foe of the Partitive Genitive, Judge Mark V. Holmes, back from summer hols and rarin’ to go with a small-claimer, David William Laudon, 2015 T. C. Sum. Op. 54, filed 9/8/15.

DW is a traveling Minnesota chiropractor. Among his other accomplishments, DW “…made nearly $290,000 in bank deposits from 2007 to 2009 yet reported only a bit less than $210,000 in gross receipts on his returns. He deducted as business expenses for his chiropractic home office a Microsoft Xbox 360, Nintendo Wii, and numerous pieces of hair-salon equipment. He also claimed deductions for driving tens of thousands of miles throughout Minnesota and the Dakotas–both to treat patients and to perform an assortment of other services.” 2015 T. C. Sum. Op. 54, at pp. 1-2.

IRS, not amused, blows away most of DW’s claimed deductions and wants accuracy chops.

DW is nothing if not unusual. “Laudon testified that he also makes ‘house calls’ and reported that he racked up between 40,000 and 60,000 miles per year in his business vehicles. He said that his patients often called him a psychiatrist, chauffeur, physician, peace officer, or even a pheasant hunter.” 2015 T. C. Sum. Op 54, at p. 2. (Footnote omitted, but it gave me the title for this blogpost.).

“But not a ghostbuster. The Commissioner rhetorically asserted that some of Laudon’s trips might have made more sense if he was claiming to be a ghostbuster. Laudon then disclaimed any employment as a ghostbuster. In his reply brief the Commissioner conceded that Laudon was not ‘employed or under contract to perform work as a ghostbuster during the tax years at issue in this case.’ We therefore need make no finding on the existence of a market for ‘supernatural elimination’ in west-central Minnesota. See ‘Ghostbusters’ (Columbia Pictures 1984).” 2015 T. C. Sum. Op. 54, Footnote 2, at pp. 2-3.

Fortunately Minnesota is not subject to the jurisdiction of the Seventh Circuit, or these attempts at humor might fall foul of that acerbic jurist, Judge Posner. See my blogpost “There Goes the Neighborhood,” 9/3/13.

Of course, IRS was represented by that formidable legal scholar, John Schmittdiel, Esq. Scholar John was diploma’ed by no less than Judge James S. (“Big Jim”) Halpern in my blogpost “Go To the Head of the Class,” 3/26/14. I had no idea that Scholar John was a stand-up comic as well.

But seriously, folks, DW’s wanderings and peculiar deductions fail for want of substantiation.

“While we accept that Laudon treated patients in his home at least some of the time, we don’t find credible his testimony that his basement was used exclusively for his business. We particularly disbelieve his claim that the Xbox, Wii, big-screen TVs, and other electronics in his basement were used exclusively for chiropractic purposes since this claim conflicts with his much more plausible admission to the IRS examiner during audit that his daughter and his girlfriend’s son would play these video games while he was on the phone.” 2015 T. C Sum. Op. 54, at p. 10. (Footnote omitted).

Once again, the footnote is for fun. “Laudon further undermined his credibility by claiming that he used the Wii and Xbox 360 to keep his patients ‘active and moving.’ These are well-known games whose features are not subject to reasonable dispute and are ‘generally known within the trial court’s territorial jurisdiction.’ Fed. R. Evid. 201(b)(1). One can imagine the Wii–with games such as Wii Bowling and Wii Fit that feature motion-based controllers requiring physical activity from its users–might be used for its physical benefits. But no reasonable person could think that the Xbox 360 could be–Microsoft didn’t introduce the Kinect until late 2010, just in time for Christmas and before the years at issue in this case. Before Kinect, Xbox playing was more of the vegging-out-on-the-couch variety.” 2015 T. C. Sum. Op. 54, at p. 10, Footnote 5.

DW is out, but Judge Holmes certainly had fun. But let’s leave the humor to Steven Colbert’s debut tonight.

Rather hard to sparkle on the Friday before Labor Day, with the thermometer in the mid-eighties and the humidity at palpable. It’s just past six p.m., EDST, and my personal rule is that, if I’m not up with a post by that hour (local time), I’ve lost the day.

So I am casting about for something wherewith to sparkle, and candor compels me to state there ain’t a lot.

It seems that most of the 400 Second Street, NW, Glasshousers have hit the trail for barbecue.

The Ogden Sunseteers have unloaded Publications 5232 and 5232-A, each a one-page beginner’s guide to the giant slalom and moguls of Section 7623. To encourage potential blowers, the Ogden crew provides the following: “It frequently takes 5 to 7 years, or more, for the Whistleblower Office to make a decision about a claim.” Somewhat reminiscent of the old tale about the Czar, the despised one, the poodle dog and the French language.

But read it all for yourselves. http://www.irs.gov/pub/irs-pdf/p5232.pdf and http://www.irs.gov/pub/irs-pdf/p5232a.pdf

The latter is an explanation of what happens to a claims for a whistleblower award. In further explication thereof, see Thomas Heggen’s 1946 novel Mr. Roberts, specifically that portion relating to how Mr Roberts imagined his applications for transfer were treated by Navy Bureau of Personnel.

But that Obliging Jurist, Judge David Gustafson, bless him, has a designated hitter, Avet Coach Corp., Docket No. 25052-07L, filed 9/4/15.

Basically, petitioner’s counsel bails, to the unanimous agreement of all parties. But counsel bails after a telephone conference initiated by Judge Gustafson, when IRS moved for summary J and no answer came from petitioner or counsel aforesaid.

After said teleconfab, counsel bailed by mail. Judge Gustafson gets testy, which is happening more often, it seems; I hope these rulebreakers aren’t wearing him down.

“…after the Court initiated a telephone conference with counsel for both parties, petitioner’s counsel mailed… a motion to withdraw as counsel. (This mailing was not in compliance with the Court’s procedures requiring electronic filing. As a result, the undersigned judge’s receipt of the motion was delayed by several days. Petitioner’s counsel is admonished to comply with the Court’s procedures in the future.) The motion states that neither petitioner nor respondent objects to the motion to withdraw.” Order, at p. 1.

So Amvet will appear by an officer, to whom Judge Gustafson addresses one of his shotgun orders, directing said officer to answer IRS’s summary J motion a week before calendar call, at which said calendar call the motion will be argued. And it’s answer and argue, or go home.

And as said calendar call is coming to a venue near me, I shall show up thereat, notwithstanding my midnight departure next day for Berlin and the Eisbären, the First Floor Restaurant and KaDeWe.

Cain’t hardly wait.

No, not the theme song from Mondo Cane, a 1962 pseudo-documentary, which tune produced any number of wedding singers’ outpourings. I must have danced, or waddled, through dozens of such, as friends took the plunge.

Rather, this is another example of defects of the “shoebox” gambit, as disclosed by that Obliging Jurist, Judge David Gustafson, in a designated hitter, Jean Michel Cazabat, Docket No. 2271-14, filed 9/3/15.

JMC and IRS were dueling over document production. The principal bone of contention was JMC’s response to IRS’s demands that he fork over substantiation of four classes of business expenses. JMC claimed he had, but IRS wasn’t best pleased with JMC’s response.

“For each of these four classes of requested documents, petitioner responded that responsive documents ‘were enclosed with Petitioner’s proposed Stipulation of Facts as’ a specified exhibit. Respondent replies: ‘In response, petitioner referred respondent to voluminous bank and credit card periodic statements he had provided earlier. Respondent respectfully requests that petitioner be compelled to indicate, in a meaningful way, how the proffered documents support the expenses.’” Order, at p. 2.

Judge Gustafson finds IRS is right: “Without having the documents in front of us, we surmise that respondent is reasonable in asking for citations. A petitioner could not carry his burden of proof to substantiate deductions by submitting unexplained bank and credit card statements as evidence and then expecting the Court to puzzle through them and link the entries thereon. He would need to give testimony, presumably aided by a spreadsheet or other demonstrative exhibit, that would show the relevance of specific entries. In the right circumstance, a ‘summary’ under Fed. R. Evid. 1006 might be expedient. In any event, petitioner would need to offer more than his raw bank and credit card statements, and respondent is entitled to obtain that ‘more’ in discovery.” Order, at p. 2.

Most of the rest of the fight is over the Section 7525 adviser privilege, and Judge Gustafson finds JMC blew it. IRS refers to “various affidavits” wherein JMC’s adviser discussed communications with and to JMC.

Just a tad testy (for such an Obliging Jurist) at IRS’s want of specificity (“It would have been helpful if respondent had given specific citations to these ‘various affidavits’, which were apparently filed before the undersigned judge had jurisdiction over this case….” Order, at pp. 2-3), nevertheless Judge Gustafson obliges IRS by finding a couple paragraphs (hi, Judge Holmes) in an affidavit wherein said adviser advises all and sundry that JMC handed him everything he needed to prepare the return in question, that what he got enabled him to prepare a true and complete return, and that JMC never intended to understate income or tax due therefrom.

“It does appear, as respondent argues, that whatever privilege may have initially attached to communications between petitioner and Mr. X has indeed been waived.” Order, at p. 3. (Name omitted). If you’re going to argue reliance on your adviser, everything is a free-fire zone.

There’s more, but you get the idea.

If you petition a SNOD and your petition hits Judge Paris’ desk, she’ll give you an opinion, whether you want it or not.

Back from a vacation and a visit to Citifield, home of the Amazin’s, which is why this blogpost is being written in the midnight hour, I need to satisfy my readers, few but worthy.

So here’s William Alan Gay, Docket No. 10096-14, filed 9/2/15.

Wm Alan moved to dismiss his petition because IRS allegedly failed to participate in discovery, and anyway Wm Alan got a discharge in bankruptcy.

Nobody told Judge Paris about the bankruptcy, and it seems she is a trifle miffed at this omission. Post-petition and pre-discharge, IRS hit Wm Alan with a First Demand for Admissions. This Judge Paris tosses summarily.

But the automatic stay in 11 USC §362(a)(8) expires with the granting of a discharge. So if the debt is discharged, why go on with the case?

Well, Judge Paris will tell you why, even though Wm Alan wants out.

“… the Court does not regard ‘the dischargeability of the tax obligation’ to be an issue before us at this time, as the instant action is not a collection action under I .R .C. section 6330(d) but rather one for redetermination under I.R.C. section 6213(a). …prior to this bankruptcy filing, petitioner filed a timely petition in response to a Notice of Deficiency, dated April 14, 2014, for his taxable years 2007, 2008, 2009, and 2010, which invoked the jurisdiction of this Court. Accordingly, the tax and penalties in issue had not been assessed, but are assessable subject to the outcome of this case. Therefore, the Court’s jurisdiction to determine whether petitioner’s tax liabilities were discharged in the bankruptcy proceeding need not be answered as a prerequisite to deciding the substantive merits of the income tax issues presented in this case.” Order, at pp. 1-2.

And of course our old chum Settles says you can’t dismiss a timely petition from a SNOD without giving IRS a win. See my blogpost “Dismissed!”, 5/8/12.

But Judge Paris tells Wm Alan he can’t dismiss his petition. Why Judge Paris comes to this conclusion eludes me. Suppose Wm Alan concedes IRS was right and the SNOD is 100% valid. But if the indebtedness arising therefrom was discharged in bankruptcy, why should Wm Alan or anyone else care? So why waste time with a motion for entry of decision, when a simple dismissal does the same thing?

Ah, the anfractuosities of Tax Court practice. Let’s decide if the SNOD is correct, even if the indebtedness arising therefrom was discharged in bankruptcy.

I’ve noticed a trend in restaurants, where servers will not issue separate checks to a group of diners. It may be the advent of computerized billing, or a disinclination to do arithmetic for their patrons. This leads either to splitting by the diners, or advanced mathematical calculations lasting almost as long as the meal.

But, attorneys and USTCPs, take note: Tax Court requires separate checks. Thus spake Ch J. Michael B. (“Iron Mike”) Thornton, in Gary Miller & Connie Miller, Docket No. 17074-15, filed 9/1/15, a very dull day at 400 Second Street, NW.

See to what I have been reduced, finding blogfodder in such trivia.

“…the Entry of Appearance by A and B was filed in this case. The Court did not recognize B as counsel of record for the petitioners because the entry of appearance was eFiled by A. Each practitioner is required to electronically file a separate entry of appearance.” Order, at p. 1. (Names omitted).

It might be well if there were a Tax Court rule so stating, but Rule 24(3) is ambiguous: “(3) Subsequent Appearance: Where counsel has not previously appeared, counsel shall file an entry of appearance in duplicate, signed by counsel individually, containing the name and docket number of the case, the name, mailing address, telephone number, and Tax Court bar number of counsel so appearing, and a statement that counsel is admitted to practice before the Court. A separate entry of appearance, in duplicate, shall be filed for each additional docket number in which counsel shall appear.”

The Rule doesn’t state that each counsel must file a separate Entry of Appearance. The only mention of separate entries of appearance is in case of multiple docket numbers. If the requisite information for each counsel appears on one page, even if eFiled, does that not satisfy the Rule?

And Form 7 states only that separate entries of appearance are required for separate docket numbers.

Well, perhaps the hard-laboring clerks at 400 Second Street, NW, really want separate checks.

No, not the Mel Gibson-Sigourney Weaver 1982 epic. Rather this is a caution to those who petition Tax Court and Bankruptcy Court for the same year.

And who better to expose this trap for the unwary but The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a as the Inveterate, Indefatigable, Illustrious, Implacable, Imperturbable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes?

He designates this one, Robert Roseberry & Della Roseberry, Docket No. 261-14S, filed 8/31/15. And thanks, Judge Holmes, for sparing me from wading through eight (count ‘em, eight) pages of orders while I’m vacationing at Fort Ticonderoga in The Empire State.

Rob & Del petition Tax Court for two years and file chapter. They were heading to trial in Birmingham, AL, when IRS’s counsel woke up and invoked the automatic stay in 11 USC§362. Rob & Del didn’t object, so Judge Holmes dismissed for want of jurisdiction.

But consciousness, once awakened, is a difficult thing to restore to somnolence. One of the years that Rob & Del petitioned to Tax Court was the very year in which they filed chapter.

IRS’s counsel, wide awake now, moves to restore the case for the year in which Rob & Del filed chapter.

“One of the deficiencies that the Roseberrys challenged was for the 2011 tax year. For them, that tax year ended at the end of 2011, but they filed their bankruptcy case in February 2011. Ever since 2005, the Bankruptcy Code has not extended the protection of the automatic stay to tax years that haven’t ended before a bankruptcy petition is filed. See People Place Auto Hand Carwash, LLC v. Commissioner, 126 T.C. 359, 362 n.6 (2006). Neither party nor the Court noticed this before dismissing the Roseberrys’ entire case, but it’s not too late to fix the mistake.” Order, at p. 1.

Judge Holmes always finds something new to learn. See my blogpost “Always Something to Learn,” 10/24/14.

Note that Ch J Michael B. (“Iron Mike”) Thornton, who wrote the People Place opinion, stated in that footnote 6 that the 2005 Bankruptcy Code amendment didn’t apply in People Place, because the People Place petitioners filed chapter prior to the effective date of the amendment to the Bankruptcy Code. So maybe it’s dicta, but so what?

The amendment does apply to Rob & Del, so Judge Holmes vacates his earlier dismissal, and reinstates it only as to the 2010 tax year, the year prior to the chapter filing.

So it’s “game on” as to the 2011 tax year.

Takeaway– Watch those petitions, practitioner.

No, not the undoing of a multi-party advance pricing agreement with deficiencies in the billions. This is a sad story buried in 120 orders on a dull August Friday afternoon in Tax Court.

Hear now the tale of Angela Lynn Goodwin & Little John Goodwin, Docket No. 17516-15, filed 8/28/15, that doesn’t even make it to designated hitterdom. The story reminds us that the turbid ebb and flow of human misery washes even to the Glasshouse at 400- Second Street, NW.

Ch J Michael B. (“Iron Mike”) Thornton has much to say about the mentally disabled and their next friends, when court-appointed conservators or guardians can’t be found, but you’ve heard all that before now, and I’ve blogged it too, more than once.

But Little John’s sad story puts a human face on a technical discussion.

The petition from the SNOD at issue was signed by Angela Lynn only. Ch J Iron Mike ordered Little John to hop aboard. In the meantime, IRS answered the petition.

“On August 26, 2015, Mrs. Goodwin filed a Letter. Among other things, in her Letter Mrs. Goodwin states that: (1) Mr. Goodwin is not well; (2) since April 16, 2015, he has been missing from the home and his whereabouts are unknown; and (3) on the last occasion Mrs. Goodwin spoke with him, Mr. Goodwin sounded delusional.” Order, at p. 1.

Ch J Iron Mike wants IRS and Angela Lynn to decide about friending Little John, or otherwise dealing with his role.

Sounds like Little John needs more than a next friend in a Tax Court litigation.

When a taxpayer sends IRS money, it can be intended for one of two things: either to pay a liability, or to serve as a deposit (which can stop the accrual of interest). If a deposit, the taxpayer wants to fight the asserted liability, and can do so. But if a payment, then to the extent the money is applied to the liability (and the taxpayer so intended), then there’s nothing more to fight about.

But payment of an asserted deficiency strips Tax Court of jurisdiction, while a deposit does not.

So The Judge With a Heart, STJ Armen, wants to know which it is, in Hilbert Edward Schoeninger & Janis H. Schoeninger, Docket No. 16875-14S, filed 8/27/15.

It’s been a long day, starting with vacation in the Berkshires, a meeting in Albany, and a trip to the Green Mountain State, so I’ll be brief.

IRS hit Hil & Jan with a CP2000, Hil & Jan sent IRS a check, IRS sent a SNOD, Hil & Jan petitioned the SNOD, and IRS moved to dismiss, claiming no jurisdiction as Hil & Jan paid in full. But Hil & Jan’s petition was directed to liability for the deficiency.

So STJ Armen wants to know whether Hil & Jan paid or deposited.

Tax Court jurisdiction depends upon a valid SNOD. If the asserted deficiency has been paid before issuance of the SNOD, no jurisdiction. But if the petitioner deposited the money to stop accrual of interest and still wants to fight the deficiency, then jurisdiction.

“Rev. Proc. 2005-18, 2005-1 C.B. 798, gives guidance in determining whether a remittance is considered a payment or a deposit. According to Rev. Proc. 2005-18, sec. 4.01(1), 2005-1 C.B. at 799, the taxpayer may make a deposit by remitting to the IRS a check or money order, accompanied by a written statement designating the remittance as a deposit. However, if the remittance is undesignated, i.e., is not designated as a deposit, other facts and circumstances help determine whether it is a payment or a deposit. Rev.Proc. 2005-18, secs. 4.01(2), 4.03, 4.04, 2005-1 C.B. at 799-800.

“If an undesignated remittance is made in the full amount of a proposed liability, such as an amount proposed in a revenue agent’s or examiner’s report, the undesignated remittance will be treated as a payment of tax. Rev. Proc. 2005-18, sec. 4.03, 2005-1 C.B. at 799. However, any undesignated remittance that is made while the taxpayer is under examination, but before a liability is proposed in writing (e.g., before the issuance of a revenue agent’s or examiner’s report), will be treated by the Service as a deposit if the taxpayer has no outstanding liabilities. Rev. Proc. 2005-18, sec. 4.04(1), 2005-1 C.B. at 800.” Order, at p. 3.

But since neither IRS nor Hil & Jan address what the remittance was for, they should do so now.

Takeaway– Make it clear, practitioner: payment or deposit?

No, not Graham Greene’s 1951 novel nor the 1955 film version with Van Johnson and Deborah Kerr, rather this is the end of a love affair with the Chenery doctrine that began with The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Imperturbable, Implacable, Indefatigable, Illustrious, Irrefragable Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes.

Judge Holmes kicked off the fray and kicked out IRS’ summary J motion in my blogpost “He Loves Chenery,” 12/17/14.

So it looks like Fredric A. Gardner and co-petitioner Elizabeth A. Gardner, corp-sole dodge-floggers got a bye, right?

Well, guess not, because, having been given a chance to contest their Section 6700 phony-flogger chop ($47K worth), they encounter His Honor Big Julie, Judge Julian I Jacobs (hereinafter referred to as HHBJJJIJ), who finds that Fred and Elizabeth had their chance and they blew it.

And it’s a full-dress T.C., Fredric A. Gardner, 145 T. C. 6, filed 8/26/15. And not a word of dissent.

If you want to learn how to promote and flog a phony tax dodge, read pages 7 through 11 of the opinion. Then don’t do it.

While it may pay to advertise, in the Gardners’ case it brought down the IRS, who grabbed their bank records and found they’d flogged 300 of the phony deals. So the Gardners’ advertising paid the IRS.

Floggers of phony pseudo-religious dodges, read 2 Samuel 1:20.

Anyway, IRS concedes that, notwithstanding the decision of USDC for District of Arizona that “(1) the Gardners’ customers were harmed by their reliance on the structure of the corporation sole plan, (2) the United States was harmed as a result of the Gardners’ clients’ failing to pay correct amounts of tax to the Treasury, and (3) the public was harmed because the IRS was forced to devote resources to identify and recover lost revenue…. “, and enjoining the Gardners from further flogging, 145 T. C. 6, at p. 13, the Gardners never got the chance to contest the penalty, so Tax Court can look at matters de novo.

Great tactical move, IRS. De novo review takes administrative record out of the picture, and Chenery is benched for the rest of the game.

And Ninth Circuit affirmed DCDA, 145 T. C. 6, at p. 28.

Tax Court had previously affirmed the Gardners’ own tax liabilities. The Section 6700 chop came later.

The Gardners went to Appeals, which claimed they’d had a previous shot at litigating the chop, and bounced their appeals. Gardners petitioned. And, per my blogpost abovecited, went to trial.

“The section 6700 penalty is governed by the procedural rules of section 6703, which, in general, removes section 6700 penalty assessments from the deficiency jurisdiction of this Court. However, section 6330(d)(1) provides this Court with jurisdiction to review an appeal from the Commissioner’s determination to proceed with collection activity regardless of the type of underlying tax involved. And we have held that our jurisdiction includes reviewing the Commissioner’s lien and levy activities regarding penalties governed by the procedural rules of section 6703, including section 6700. Thus, we have jurisdiction to review the notices of determination issued to petitioners.” 145 T. C. 6, at p. 21. (Footnote omitted).

OK, that’s out of the way. Now what?

Section 6700 doesn’t require that any of the flogees actually bought the stuff or used it, or that if they did buy and use, it cost the fisc one centavo.

“…the legislative history of the section states that the actions of the plan participants are not relevant to the application of the section. ‘There need not be reliance by purchasing taxpayer or actual under-reporting of tax. These elements have not been included because they would substantially impair the effectiveness of this penalty. Thus, a penalty can be imposed based upon the offering materials of the arrangement without an audit of any purchaser of interests.’ S. Rept. No. 97-494 (Vol. 1), at 267 (1982), 1982 U.S.C.C.A.N. 781, 1015.” 145 T. C. 6, at p. 25.

Now IRS can trot in collateral estoppel, and they do. And it works.

“Petitioners reply that collateral estoppel is inapplicable in these cases. ‘It is clear there are no abusive transactions to give rise to the penalty. Respondent did not prove the abusive transaction. What the respondent is passing off as proof is the District Court said that the Gardners engaged in conduct that violates IRC § 6700.’ Petitioners then argue that the corporation sole plan was not an abusive tax shelter. However, petitioners’ position is precisely what the doctrine of collateral estoppel was intended to avoid: relitigating closed questions. Petitioners repeated in this Court the same argument that they made in the District Court as well as the same false statements made to their customers that led the District Court to enjoin them. We thus hold that the doctrine of collateral estoppel applies in the instant situation and that the District Court’s determination is conclusive. Consequently, respondent has met his burden of establishing that the Gardners are liable for the section 6700 penalties.” 145 T. C. 6, at p. 29. (Footnote omitted).

On the trial, IRS Senior Program Analyst Kurt (“Kuxie”) Kuxhausen buried the Gardners with his detailed discussion of his audits of flogees (some four or so of whom were actual bona fide religious, and one of whom even got a legitimate refund, and they testified for the Gardners on the trial), but he established the Gardners sold the 47 phonies alleged.

And the notice the Gardners got was sufficient, even if the tax year was wrong. They were aware what IRS demanded, and could contest, and did. And the Gardners stipulated they sold 67 schemes in the year stated in the notice, even though IRS nailed them for only 47. 145 T. C. 6, at p. 36.

By the way, even looking at the administrative record, the Gardners are out.

Sorry, Judge Holmes. The end of the affair.