Judge David Gustafson just can’t help himself…it is in his nature to be obliging. And that, even when the object of his noblesse oblige is only “in small part” deserving thereof.

So today’s designated hitter from Judge Gustafson is Marlene D. Morten, Docket No. 2451-13, filed 2/19/16. You remember Marlene, dilatory bombardier first class?

Truly not? How fleeting is fame. Well, dig my blogpost “Good Nature, Poor Spelling,” 2/1/16.

Judge Gustafson did correct the spelling from the Order in my blogpost abovecited  (“The asserted facts are relevant, discrete, objective, and verifiable or deniable,” Order, at p. 1.). But Marlene catches only a minuscule break, as she seeks reconsideration of Judge Gustafson’s order.

Now your refreshed recollection should show that IRS wanted Judge Gustafson to compel Marlene to respond to some interrogatories. But Judge Gustafson blew that off as moot, because the interrogatories in question dealt with facts which Marlene hadn’t theretofore admitted or responded to. If not directly responded to, those facts were all deemed admitted.

Nothing to reconsider here.

Marlene wants thirty days to respond to the interrogatories. Well, the facts-admitted stuff is history. But the interrogatory seeking names and contact information for witnesses Marlene will call upon the trial is another story. Notwithstanding Marlene’s delaying tactics, she gets time to provide those, although by now, three years into the program, she should have some idea who and where these witnesses might be.

In any case, Marlene’s alleged difficulties in responding to IRS are outweighed by her non-responsiveness to IRS and Judge Gustafson.

“The Court has heretofore made extraordinary accommodations to Ms. Morten in the scheduling of the trial in this case, and those accommodations are at an end. She is not entitled to render herself incommunicado and then to bear no responsibility for the prosecution of this case. Ms. Morten is obliged either to handle her duties under the rules or to hire whatever assistance is needed in order to do so.” Order, at p. 2.

So, Marlene, you’re going to trial in May, ready or not. You have thirty days to name and claim your witnesses.

And, if I may make a discreet suggestion, don’t annoy the Judge. I’ve seen it used as a tactic. It rarely works. Even when the Judge is an Obliging Jurist.

Ends

Y’all will remember the battle of the letters between the Ogden Sunseteers and Thomas M. Comparini and Vicki Comparini, Docket No. 18872-13W, filed 2/18/16.

Well, if you don’t, no reason to be shamefaced about it, check out my blogpost “Arts and the Man,” 10/4/14, when Tom and Vicki starred in 143 T. C. 14, filed 10/2/14.

You’d think after a full-dress T. C., complete with a Judge Mark V. Holmes concurrence, that Tom and Vicki were quids-in, as my UK clients say.

Alas, no. Tom and Vicki were whistleblowers, and Tom turned in a party who was advertising for dirt about a third party’s tax returns. Spotting the numerous chops therefor, Tom filed a Form 211.

There followed the epistolary ping-pong eloquently lamented by Judge Holmes, q.v., as my high-priced colleagues say.

But at the end of the day, IRS brought neither a judicial nor administrative action or proceeding, and of course got no money.

So notwithstanding Tom’s and Vicki’s protestations, STJ Panuthos, detailed to hear this correspondence course, knocks out Tom and Vicki to the same old tune.

“In their response to the pending motion for summary judgment, petitioners contend that respondent’s motion is not supported by any documents. Although petitioners agree that the Tax Court cannot order the Commissioner to commence an administrative or judicial action, petitioners contend that respondent attempts to deny petitioners’ Tax Court appeal rights and that the Tax Court should sanction respondent for constitutional violations and denial of petitioners’ rights. Petitioners also disagree with our holding in Cooper v. Commissioner, 136 T.C. 597. None of petitioners’ objections, however, are relevant to whether respondent has initiated an administrative or judicial action or collected tax proceeds.” Order, at pp. 2-3.

Winning the battle of the letters isn’t enough.

That’s Ch J Michael B (“Iron Mike”) Thornton’s lesson for an attorney I’ll call JA, in Jacqueline L. Wingfield, Docket No. 21603-15, filed 2/18/16.

The case started when JA sent in the petition, which JA had signed, but didn’t send an entry of appearance. So Ch J Iron Mike ordered Jacky to sign a ratification (in blue ink, of course), deeming JA unauthorized to sign the petition without an entry of appearance.

JA sent in her entry of appearance, but Ch J Iron Mike is true to his moniker.

“Nonetheless, despite the foregoing efforts, a jurisdictional problem remains. Because this case was initially required to be considered as filed pro se, the signature of counsel on the entry of appearance is insufficient to ratify the original petition. Rather, in order for this Court to acquire jurisdiction to consider this case, it remains necessary to obtain a Ratification of Petition bearing petitioner’s original signature and ratifying the petition previously filed.” Order, at p. 1.

Jacky, dig up that old blue pen.

And practitioners, make sure you have a spare box of blue pens on hand.

Berkshire Resources, LLC, the TMP of Berkshire 2006-5, LLP, was dead, to begin with. The late Berkshire Resources was administratively dissolved by the State of Wisconsin and the SEC was suing it for fraud. IRS issued a FPAA disallowing deductions, but the late Berkshire Resources, LLC, being late, did nothing. So it’s time for the notice partners and the five-percenters to step up.

Carl F. Hattler, 2016 T. C. Memo. 25, filed 2/17/16, was a notice partner in Berkshire 2006-5, LLP, (see Section 6223 for more about how one gets to be a notice partner). He jumps in after Day 90, but after Day 150, so he’s out. His petition is a day late, and he’s more than a dollar short.

Carl F. says Berkshire 2006-5, LLP, had no address; it too was dead. IRS should have known this. IRS says, “So what?” IRS sent the FPAA to the address shown on last tax return. TEFRA doesn’t follow the “last known address” mailing-of-deficiency rules. I’ve blogged this before. There are specific requirements for the notice the partnership (or anyone acting on its behalf) must give to IRS, and where to give it. Nobody did.

Carl F. says the FPAA is invalid because the late Berkshire Resources was dead. Wrong, says Judge Buch. “Even assuming that Berkshire Resources was no longer the TMP because it had been administratively dissolved, the Commissioner satisfied the notice requirement under section 6223(a) because the generic FPAAs mailed to the ‘Tax Matters Partner’ at the partnerships’ addresses are valid.” 2016 T. C. Memo. 25, at p. 8.

Carl F. claims the FPAA is invalid because IRS didn’t choose a new TMP. Wrong again, Carl F. “The Commissioner’s authority to select a TMP is very limited. First, the partnership must not have designated a TMP or the TMP’s authority must have terminated. Then, the TMP is the general partner with the largest profits interest by operation of law. Only if that test is ‘impracticable to apply’ can the Commissioner select a TMP. And in any event, there is simply nothing in section 6231(a)(7) that requires the Commissioner to select a TMP.” 2016 T. C. Memo. 25, at pp. 8-9. (Footnotes omitted).

Anyway, Carl F. got the notice partner’s notices of the FPAA in time for him to petition timely. That he was a day late in filing is his problem.

And Rule 245(c) doesn’t help Carl F. That applies only to intervention once jurisdiction has been established by petitioner; it can’t create jurisdiction where there wasn’t any.

Footnote to the foregoing: Since the Revenue Act of 2015 (known to some who like cutesy acronyms as the Protecting Americans from Tax Hikes Act) has eliminated TEFRA, with its concomitant FPAAs, TMPs, notice partners and five-percenters, the foregoing appears as a matter of record.

Edited to correct, 8/24/22: TEFRA was eliminated by the Bipartisan Budget Act of 2015, not the Revenue Act, a/k/a the PATH Act.

Earlier today I blogged the failure of a transferee to win the SOL gambit. See my blogpost “SOL on SOL,” 2/16/16.

Here the IRS has the same problem.

It’s a designated hitter from The Judge With a Heart, STJ Armen, Craig Leyon Blocker, Docket No. 5794-15, filed 2/16/16.

Craig Leyon raises SOL in his petition for the two years at issue. IRS counters with motion for partial summary J, trying to KO Craig Leyon’s SOL defense.

I won’t name IRS’ counsel.

STJ Armen will address his defective pleadings.

“Notably, in his motion respondent does not address the taxable year 2012 even though the Petition appears to raise a limitations issue as to that year and even though respondent included affirmative allegations in his Answer expressly addressing such issue. Further, respondent did not attach as an exhibit to his motion proof of mailing of a notice of deficiency, notwithstanding the fact that petitioner raised an issue regarding the mailing of such notice in his Reply. Finally, respondent did not attach as exhibits to his motion copies of petitioner’s income tax returns for the years in issue or otherwise address whether petitioner may be a taxpayer who keeps his accounts and who files his returns on other than a calendar-year basis.” Order, at pp. 2-3.

Craig Leyon is pro se, and usually IRS summary J motions against self-representeds are walkovers.

Not today. Motion denied with prejudice. STJ Armen has no heart for sloppy papers.

Or, Maybe Somebody Actually Reads This Blog

Ch J Michael B (“Iron Mike”) Thornton has a thankless job. He has to deal with hundreds of soul-killing orders, keep the Glasshouse administrative wheels turning but not spinning, and clean up typos.

Well, I spotted a typo last week, and it was a real conversation-stopper, as The Girl of My Dreams (s/a/k/a Nana to two wonderful little girls) is wont to say.

See my blogpost “A Date,” 2/10/16, wherein I discussed the impact of a “conversation easement” [sic] on the New York Environmental Conservation Law.

Well, Ch J Iron Mike puts Judge Marvel right today in Ten Twenty Six Investors, Douglas Oliver, Tax Matters Partner, Docket No. 29483-14, filed 2/16/16.

“ORDERED that the last sentence beginning on page 2 of the Court’s Order, dated February 9, 2016, is amended to read, ‘We have previously held, pursuant to N.Y. Envtl. Conserv. Law sec. 49-0305(4), that a conservation easement is not valid in New York until the instrument creating the easement is recorded.’ In all other respects, the Court’s Order remains in full force and effect.” Order, at p. 1.

Well now, as a former copy editor, I’m glad somebody reads this blog.

And now we don’t have to worry about talking over one another.

And IRS Doesn’t Even Have To Try

Sounds like another Midco (Notice 2001-16, 2001-1 C.B. 730, as modified by Notice 2008-20, IRB 2008-6, 2/11/2008), and Judge Foley isn’t buying the SOL ploy. As for “chase the transferor,” that gets even less traction.

The case is Estate of Janina M. Bowey, Deceased, David Hinshaw and Douglas Mack, Co-Executors, Docket No. 1045-13, filed 2/16/16.

There’s a heavy paper trail, as Dave and Doug seek summary J and partial summary J on behalf of the late Janina, whose wholly-owned C Corp was holding $1.4 million in cash, a hefty promissory note from the late Janina, and $1040 in prepaid tax expenses (don’cha love that number?). Unhappily, the late Janina’s C Corp owed $468K in tax.

So the late Janina uploaded all her stock to an outfit called MNA Holdings, LLC, in exchange for $1.248 million in cash, payoff of the late Janina’s six-figure note, and a promise to pay the $468K in tax.

Sound familiar?

Dave and Doug argue that IRS blew the Illinois Fraudulent Transfer Act SOL.

Nonstarter. “The period of limitations for assessment relating to transferee liability is determined by section 6901 (i.e., generally ‘within 1 year after the expiration of the period of limitation for assessment against the transferor’), not state law. See sec. 6901(c); Bresson v. Commissioner, 111 T.C. 172, 190 (1998), aff’d, 213 F.3d 1173 (9th Cir. 2000).” Order, at p. 2.

And chase-the-transferor gets nowhere just as fast. “The procedural elements of transferee liability are determined pursuant to section 6901, while the substantive elements are determined by state law. See Commissioner v. Stern, 357 U.S. 39, 42-45 (1958). Whether petitioner’s liability is contingent on respondent attempting to collect the tax from any other person, is a substantive question determined by state law. See Hagaman v. Commissioner, 100 T.C. 180, 183-184 (1993). The Illinois Uniform Fraudulent Transfer Act does not require a reasonable collection effort from respondent before asserting transferee liability against petitioner. M 740 ILCS section 160/1 et seq. Accordingly, respondent was not required to attempt to collect [C Corp]’s tax liability from MNA Holdings.” Order, at p. 2.

So no summary J for Dave and Doug. And Judge Foley sends them back to general docket.

Probably that’s a long walk.

A fictional old-time lawyer complained about Congress making folks “be born again on a Monday.”

For my readers in “strondes afar remote,” today is such a Monday, a public holiday in these United States, when government offices and courts are closed.

Thus there is no enlightenment from this quarter today. Be back tomorrow.

The 1908 British music hall song echoes through Tax Court today, as Thomas F. Kelly, Esq., strives mightily to undo the tax lien filed against his client, Gregory P. McGuckin, Docket No. 8185-15L, filed 2/12/16. STJ Armen, The Judge With a Heart, may not have seen Mr Kelly, but he has heard from him. The result is not gratifying.

Greg McG filed an OIC, but got bounced. He didn’t petition for a CAP, but he did get an NFTL. Mr Kelly, denominated by STJ Armen as a “POA” (which is a piece of paper, Judge; the party who grants the POA is the “taxpayer,” and the party receiving powers thereunder is the “representative”; see Form 2848), claims he should have gotten the denial letter from OIC Unit, as his principal’s timely-filed POA said he should get correspondence. So he offers no alternatives, even though OIC Unit decided Greg McG could do an IA and pay in full thereby.

“Mr. Kelly claimed that in accordance with Form 2848, the IRS was required to send him a copy of the…OIC rejection letter but failed to do so. Mr. Kelly further claimed that if he had received it, he would have timely appealed the denial of the OIC, during which appeal, Mr. Kelly claimed, the IRS would have been prohibited under its Internal Revenue Manual (IRM) from filing the NFTL. Mr. Kelly did not dispute petitioner’s underlying liability or that petitioner received the OIC denial letter in time to file an appeal.” Order, at p. 2.

Well, the SO noted the record showed that a copy of the letter had been mailed to Mr Kelly at his office address. And the IRM did not prohibit filing a NFTL while an OIC was being reviewed. And while IRS can withdraw a NFTL, it doesn’t have to, and the four (count ‘em, four) magic criteria (premature, or otherwise not in accordance with established procedures, or will facilitate collection, or in best interests of taxpayer and the fisc) don’t apply here. And even if all four did, IRS doesn’t have to, and Tax Court can’t make them.

“A Federal tax lien arises automatically after notice and demand for an assessed tax liability is not paid. The record in this case shows that the tax liabilities for the years at issue were all assessed prior to August 26, 2013. Although the lien exists as a matter of law, to ensure its priority with relation to other creditors, respondent is authorized to file a NFTL. There is no legal authority that restrains respondent from filing an NFTL until after an OIC and appeal is concluded. Accordingly, respondent was within its authority to file a NFTL in this case well before it actually did so….” Order, at p. 3. (Citations omitted; but I can’t tell the significance of the August 26, 2013 date; the NFTL wasn’t sent until September 30, 2014. And Greg McG submitted his OIC on August 12, 2013. So what gives?).

Howbeit, the IRM isn’t law and gives taxpayers no rights. And the Regs give IRS the option of sending bounces of OIC either to taxpayer or representative; see Reg. 301.7122-1(f)(1). Greg McG got the bounce timely and could have filed a CAP. Neither he nor Mr Kelly had the right to stall a NFTL while he did so.

Summary J for IRS.

Even If It Didn’t Work

I can understand counsel getting really tired of a crafty adversary, and trying to torpedo the elusive foe. And, without naming IRS counsel, I want to reward her ingenuity with a Taishoff “nice move” (which is the only reward she will get, I fear, as Judge Wherry isn’t buying her inventive maneuver).

The case is Derringer Trading, LLC, Jetstream Business Limited, Tax Matters Partner, et al., Docket No. 20872-07, filed 2/12/16. And if the cast of characters seems familiar, yes, we’re back in Mr Rogers’ neighborhood. And this is yet another iteration (or reiteration) of the DADs deals Mr Rogers flogged far and wide, the blowing-up of which provided much copy for this blogger and much work for IRS.

So inventive IRS counsel filed a Motion for Order to Show Cause Why Judgment Should Not Be Entered Against Petitioner on the Basis of a Previously Decided Case, citing to one of the many blow-ups of the phony partnerships that married big gains to distressed Brazilian debt, to step up basis and create a loss. IRS counsel wants a finding that the partnership had no basis in the Brazilian junk, but they do have a 40% overvaluation chop.

Derringer and its adherents claim their case is different, but Judge Wherry is dubious about the alleged factual dissimilarities.

He isn’t dubious about IRS counsel’s ingenious but flawed attempt to sidestep Rule 121.

“…in Tax Court litigation, as so often under the tax law, form matters. Where no material fact is genuinely in dispute, this Court’s rules provide a mechanism by which a party that believes the governing law, when applied to those undisputed material facts, compels a decision in its favor, may seek judgment as a matter of law: a motion for summary judgment. See Rule 121. On a motion for summary judgment, the moving party has the burden of showing the absence of a genuine issue as to any material fact, and ‘all doubts as to the existence of an issue of material fact must be resolved against the movant[].’ Electronic Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002) (citing Adickes v. Kress & Co., 398 U.S. 144, 157 (1970), Dreher v. Sielaff, 636 F.2d 1141, 1143 n.4 (7th Cir. 1980), and Kroh v. Commissioner, 98 T.C. 383, 390 (1992)). By seeking a show-cause order, respondent effectively seeks to turn the tables. Rather than assume the burden of showing why judgment should be entered, respondent would impose on petitioner the burden of showing why it should not be entered.” Order, at pp. 2-3.

So make the motion, counselor. And may the Force be with you.