No, this is not about landing your aircraft. I’ve never done that and don’t know how. This is about an OIC based on Effective Tax Administration, hereinafter referred to as “ETA.”

Writing the checklist is Judge Kerrigan, now warming up for the big Eaton Corporation and Subsidiaries trial, eventually coming to a blog near you maybe so.

The case is Lynn Edward York and Cynthia Lee York, 2015 T. C. Memo. 159, filed 8/13/15.

The Yorks want an OIC based on ETA. They’re long-haul truckers who filed for five tax years but didn’t pay all that was due, so they’re about $27K in the hole.

The SO sent the Yorks a letter setting up a teleconference, but the Yorks claimed that didn’t understand that was the purpose of the letter, so they skipped the teleconference.

“The letter explains clearly the purpose of the call and requests information from petitioners. A settlement officer has the discretion to decide when to end the administrative CDP proceedings where requested information and/or completed forms are not provided to her. See sec. 301.6330-1(e)(3), Q&A-E9, Proced. & Admin. Regs. It was not an abuse of discretion for the settlement officer to recommend the notice of determination be sustained as a result of petitioners’ failure to provide the requested information in a reasonable time.” 2015 T. C. Memo. 159, at p. 7. (Citation omitted).

OK, so the SO can kick the CDP. We know all that. But how about ETA?

“The Secretary may compromise a liability on the ground of effective tax administration when: (1) collection of the full liability will create economic hardship or (2) exceptional circumstances exist such that the collection of the full liability would undermine public confidence that the tax laws are fairly and equitably administered. Speltz v. Commissioner, 124 T.C. 165, 172-174 (2005), aff’d, 454 F.3d 782 (8th Cir. 2006); sec. 301.7122-1(b)(3), Proced. & Admin. Regs.” 2015 T. C. Memo. 159, at p. 8.

For economic hardship, look at long-term illness or disability, obligation to care for dependents, or assets that cannot be used to secure loans, or, if sold, would leave petitioner unable to meet basic living expenses (per IRS guidelines).

The Yorks strike out on all three economic tests, on their own numbers.

As for special circumstances, they don’t allege any, but Judge Kerrigan will give us some examples anyway.

“The Secretary may enter into a compromise to promote effective tax administration where compelling public policy or equity considerations identified by the taxpayer provide a sufficient basis for compromising the liability. A compromise will be justified only where, because of exceptional circumstances, collection of the full liability would undermine public confidence that the tax laws are being administered in a fair and equitable manner. A taxpayer proposing a compromise on the basis of effective tax administration will be expected to demonstrate circumstances that justify a compromise even though a similarly situated taxpayer may have paid his liability in full. Examples of cases where a compromise is allowed for purposes of public policy and equity include: (1) a taxpayer who was hospitalized regularly for a number of years and was unable to manage his financial affairs incurs significant tax liabilities, penalties, and interest and (2) a taxpayer learns at audit that he received erroneous advice from the Internal Revenue Service and, as a result, is facing additional taxes, penalties, and additions to tax.” 2015 T. C. Memo. 159, at pp. 9-10. (Citations omitted).

For more about ETA, see my blogpost “Leftovers,” 3/19/14.

I won’t cite here to my numerous blogposts engendered by the Supremes’ decisions in Chenery I and Chenery II. The agency’s stated rationale is the only thing on the table in an abuse-of-discretion review, and the administrative record is “all ye know on earth and all ye need to know,” as a much better writer than I put it.

But what happens when a CDP abuse-of-discretion gets bounced back to Appeals because IRS says it didn’t give petitioner the documents he asked for and failed to confirm he received the Letter 1085 (DO) asserting his unpaid FICA/FUTA?

Well, you can ask Michael E. Lunnon, or better yet, read Judge Marvel’s opinion in 2015 T. C. Memo. 156, filed 8/12/15.

IRS sent Mike a Letter 1058(DO) demanding the FICA/FUTA based on SFRs. The letter was signed for by one Cameron Curley, supposedly an employee of Mike’s at his UPS Store.

Mike never responded to that, but did respond to the Letter 1058 NITL, and got a hearing. Mike supplied frivolity but no information contradicting the SFRs or supporting his request for collection alternatives.

After the NOD, and after Mike’s timely petition, IRS subpoenaed more of Mike’s bank records in preparation for trial. Then IRS moved to remand on the above-stated grounds, and Tax Court granted the motion.

So Mike gets what might be another hearing, or might be a continuation of the first hearing. And claims IRS can’t rely on the later-acquired bank records, as this would violate Chenery.

Judge Marvel: “…sections 6320(b)(2) and 6330(b)(2) provide that a taxpayer is entitled to only one hearing with respect to either an NFTL or a proposed levy, respectively, for the year related to the unpaid liability. A hearing on remand is a supplement to the taxpayer’s original section 6320/6330 hearing and provides the parties with the opportunity to complete the initial section 6320/6330 hearing while preserving the taxpayer’s right to receive judicial review of the ultimate administrative determination. The Appeals Office on remand is not constrained by the original administrative record, as often the purpose of remand is to augment a deficient record. The Appeals Office makes a single determination with respect to an NFTL or a proposed levy for a taxable period. When this Court remands a case and the Appeals Office issues a supplemental notice of determination, we review the determination as supplemented.” 2015 T. C. Memo. 156, at pp. 17-18. (Citations and footnotes omitted).

And although the second set of subpoenaed bank records related to other periods, and to Mike’s LLC, they also contained information relevant to Mike and the years at issue.

“We remanded this case in part for the Appeals Office to clarify whether petitioner had a prior opportunity to challenge the underlying liabilities and to explain to petitioner the basis of the underlying assessments. Settlement Officer X appropriately relied on the additional documents to carry out the Court’s remand order and did not violate the Chenery doctrine in doing so. Petitioner may not distort the law to justify his continued refusal to cooperate with respondent or his abdication of the fundamental responsibilities of maintaining records and filing tax returns.” 2015 T. C. Memo. 156, at pp. 18-19. (Name omitted).

Mike never properly raised his liability for the FICA/FUTA at Appeals, so whether or not Cameron Curley was the proper party to get the Letter 1058(DO) is a nonissue.

Takeaway—An old saying, but a true one: protect your record.

But don’t delay. And better still, if you’re going to Tax Court, read the Rules.

Fortunately for counsel in C&G Consultants, Docket No. 8598-14L, filed 8/11/15, Judge Gale puts them right, even though they ask imperfectly.

Counsel moves for reconsideration, claiming Judge Gale mistakenly denied subject matter jurisdiction over their motion for attorneys’ fees and litigation costs.

No, says Judge Gale, you didn’t read the Rules. And Taishoff says “nor did you read my blogpost “Ask Early, Ask Often,” 12/9/13“.

“The Court did not find that it lacked subject matter jurisdiction over petitioner’s motion for litigation costs. As more fully explained below, the Court deemed petitioner’s Motion for Reasonable Litigation or Administrative Costs moot because, under a straightforward application of the Courts’ rules governing claims for litigation costs (Title XXIII of the Tax Court Rules of Practice and Procedure), petitioner had apparently conceded its claim by virtue of executing a stipulated decision that did not provide for such costs.

“The heart of the confusion here stems from petitioner’s counsel’s failure to appreciate that the Court’s Rules governing awards of litigation costs contemplate only a single decision being entered in a case. That single decision must include the award of litigation costs, if any. See Rule 232(f). (‘The Court’s disposition of a motion for reasonable litigation or administrative costs shall be included in the decision entered in the case.’) The requirement that an award of litigation costs be incorporated in a single decision in the case ‘is designed to simplify appeal procedures by incorporating into a single document the Court’s disposition of both the substantive issues in the case and the motion for reasonable litigation or administrative costs.’ Note accompanying amendment to Rule 232(f), 93 T.C. 1021.” Order, at pp. 1-2. (Footnotes omitted.)

But counsel gets lucky, because within six days after it was entered, they moved for reconsideration of the order that denied their litigation costs.

So Judge Gale distinguishes between C&G’s counsel, and the unfortunate Bill and Liz Foote, who got the boot (sorry, guys) from Judge Wherry in my abovecited blogpost.

Judge Gale vacates his decision, treats the parties’ stip of settlement as a stip of settled issues, grants the motion for reconsideration and tosses his previous order, and tells IRS to respond to C&G counsel’s claim for litigation costs.

Takeaway—Quoting from my blogpost above cited: “Read the Rules, guys. If you’re going to practice in Tax Court, or before the IRS, read the Rules.”

Gerald Lee Ridgely, Jr.’s story is also Scott E. Charnas’s story, in 2015 T. C. Memo. 153, filed 8/11/15. Gerald Lee and Scott E. both get paid on contingency, Gerald Lee as a CPA and Scott E. as a PI lawyer. Gerald Lee’s story is found in my blogpost “It’s Contingent? – Great,” 7/17/14.

For you civilians in the audience, “PI” means plaintiff’s personal injury, the wonderful world of torts. Practitioners in that field generally get paid only if they win; if they lose, it’s a long walk home. And cases can go on for years, if there are big bucks in the game.

So Scott’s income is, to say the very least, variable.

So when Scott E. files returns but doesn’t pay, and asks for a collection alternative or three when he gets the NITL, the SO doesn’t consider Scott E.’s variable income stream, although he put it all over his Form 433-A. Scott didn’t put on an attachment telling his contingent tale, and IRS says he should have, but Judge Wells doesn’t care.

Instead of a telephone CDP, Scott and representative showed up at the Appeals office with papers telling his tale. The SO was out sick, but the papers were dropped off and the SO reviewed them. But her notes say nothing about the discrepancy in Scott E.’s year-to-year income or his statement that his income varies year-to-year.

IRS claims the correspondence review does the job. Judge Wells doesn’t think so.

“The question is not whether a correspondence-only hearing is generally legally sufficient. Rather, the question is whether a correspondence-only hearing was sufficient to provide petitioner the fair hearing to which he is entitled pursuant to sections 6330 and 6320. We note that the regulations provide that, if the taxpayer presents ‘relevant, non-frivolous reasons for disagreement’ with the proposed collection action, the taxpayer will ‘ordinarily be offered an opportunity for a face-to-face conference’. Id. It is only if the offer is unsatisfactory to the taxpayer that the taxpayer will be ‘given an opportunity for a hearing by telephone or by correspondence’. Id.” 2015 T. C. Memo. 153, at p. 11.

The Id. is Reg. 301.6330-1(d)(2).

Correspondence-only might fly where the SO considered all of Scott E.’s relevant, non-frivolous reasons for disagreeing with the NFTL and wanting an installment agreement, OIC or CNC.

But the SO didn’t consider Scott’s fluctuating income. And that is both relevant and non-frivolous.

So back to Appeals for Scott E.

I really like this opinion.

As one who has done real estate deals stretching over years on contingency, I can definitely testify under oath that I have not known what my income would be in any year since 1976. And I still don’t know.

Three cases to blog today, none worth a solo performance. If you want to learn how to run a California marijuana shop, a lucrative but risky business, read Judge Goeke’s how-to in Jason R. Beck, 2015 T. C. Memo. 149, filed 8/10/15.

Interestingly, IRS gives up some on cost of goods sold, allowing Jason $750K of what he claims, but not the $600K that DEA seized when they knocked over Jason’s pottery. 2015 T. C. Memo. 149, at p. 3 footnote 3.

And of course Section 280E bars any of Jason’s business deductions. Turns out Ninth Circuit affirmed Judge Kroupa’s turndown of Martin Olive’s drug-induced deductions. See my blogpost “Everybody Must Get Stoned,” 8/3/12; see also Martin Olive v. CIR, No. 13-70510, filed 7/9/15.

Next up, Joshua Pingel, 2015 T. C. Sum. Op. 48, filed 8/10/15, a Section 183 hobbyhorse case noteworthy for Judge Paris’s explanation of what I do.

For the edification of those recently arrived from Mars, Judge Paris states: “’Blog’ is a truncation of the expression ‘Web log’, which is a regularly updated Web site or Web page written in an informal or conversational style and typically run by an individual or small group.” 2015 T. C. Sum. Op. 48, at p. 4, footnote 3.

Thanks, Judge, that sums me up.

Jason wants to write books and blog and be a travel guide, but makes no money, although he roams pretty freely. But one of his blogposts fascinates me, and obviously irks Judge Paris, because that blogpost leaves us hanging.

“While petitioner included details about some of the sites he saw, places he stayed, and food he ate, many of his explanations do not give enough details for a reader to find the specific site, lodgings, or restaurant described. For example in petitioner’s Paris blog entry he states: ‘[W]e hit up The [sic] BEST ice cream in Europe. * * * there are a couple of places that serve it and pricing is much higher at one (the ‘tourist’ one as Jeff put it) than at the other one. We walked past the tourist one, which had a huge crowd and walked down the street about half a block to the other one.’ Petitioner does not give any more details about where in Paris the best ice cream in Europe can be found.” 2015 T. C. Sum. Op. 48, at p. 5.

I can understand Jason wanting to be coy about where the best ice cream in Europe can be found, lest the place be overrun with Tax Court Judges and bloggers, and suffer the fate described by that eminent sage Lawrence Peter Berra: “Nobody goes there any more, it’s too crowded.”

But as Jason spoke of “a couple of places,’ I doubt Judge Holmes will thither bend his joyful footsteps.

Well, until Jason unbosoms, if ever, I’m glad BlueBell is back in business.

Finally, I cannot end this somewhat frivolous summer reading without a serious word from that designated heavy-hitter, STJ Lewis (“A Name Resounding Down the Ages”) Carluzzo, Raymond S. McGaugh, Docket No. 13665-14, filed 8/10/15.

Ray wanted summary J back in May, but like Ol’ Blue Eyes has to change his tune, because his declaration in support thereof leaves out some facts.

So there is now a “”Motion to Withdraw Declaration and to Supplement Motion for Summary Judgment,” which STJ Lew will bounce.

“The recent motion to withdraw and supplement arises because of an evident need to clarify or correct that declaration. The motion recounts revised and expanded facts that are supposedly known to or realized by Mr. McGaugh (not his counsel). Documents are attached to the motion as exhibits.” Order, at p. 1.

So why bounce it?

“However, the motion is signed only by counsel, and is neither sworn nor signed under penalty of perjury. No declaration of Mr. McGaugh was submitted with the motion.” Order, at p. 1.

And even if counsel signed under penalty of perjury, (a) what personal knowledge did counsel have, and (b) if counsel did have personal knowledge, how would counsel respond to a motion to be removed as counsel because of the need for counsel to testify on the trial?

But counsel is not only prepared to speak for Raymond, whom he purportedly represents, but Raymond’s wife Mary is also named in the SNOD. Mary never signed petition, amended petition or anything else. That doesn’t keep counsel from the following:

“At the end of [the year at issue], Petitioner was married. The underlying notice of deficiency issued in Petitioner’s name as well as in the name of his former spouse. Petitioner’s divorce was finalized [next year] and he entered into a marital settlement agreement where he agreed to be responsible for all tax liabilities that arose during the marriage. Although his former spouse did not sign the petition, and is therefore not a party to this petition, she reserves the right to ratify it, if it later becomes necessary to do so, with leave of Court. [Emphasis added.].” Order, at p. 2.

STJ Lew is mildly peeved.

“Counsel for petitioner Raymond S. McGaugh has not filed a notice of appearance on behalf of Mary T. McGaugh, and therefore we cannot assume that he is authorized to speak for her. (Furthermore, we do not address whether Mary T. McGaugh retains at this date any right to ‘ratify’ the petition, nor whether we could have any jurisdiction over her as a petitioner.).” Order, at p. 2.

I’ll spare you STJ Lew’s FRCP 56 and Rule 121 lecture to Ray’s counsel. But do the docket search. When you see counsel’s name, then see my blogpost “You Have To Fulfill the Requirements,” 8/20/13. And while you’re at it, take a quick peek at 142. T. C. 24, 6/24/14.

A Bangladeshi blogger named Niloy Chowdhury was hacked to death by miltants. It was the fourth such murder this year.

If anyone’s beliefs are so fragile that one anonymous man at a computer’s keyboard can damage those beliefs, then they ought seriously to reconsider what they believe–if they are capable of rational thought, which I doubt.

Religious extremism is the most dangerous substance in the world.

John Milton’s famous line is the caption to Judge Wherry’s discussion of e-filing (which is never available for petitions or amended petitions) in Dan E. Butts & Patricia J. Butts, et al., Docket No. 20656-11, filed 8/7/15.

The opinion itself spends a lot of time on the proposition that an SFR is not a return that starts the three-year lookback for filing for a refund. I dealt with that in my blogpost “Lookback in Anger,” 12/12/11.

Dan & Pat want a Rule 161 reconsideration of their losing attempt at a refund. I blogged that one, too, in my blogpost “Lookback in Anger – Part Deux,” 4/15/15, so I won’t rehash what I said then, and what Judge Wherry says now.

Dan & Pat’s e-filing hit May 16, but as the opinion hit April 15, they were a day late on the thirty-day cutoff.

But Judge Wherry gives Dan & Pat a break on their late-filed reconsideration motion, because Tax Court’s web instructions are less than perfect.

“‘Documents filed after January 17, 2014, are entered on the record automatically as they are transmitted to the Court. They are eFiled and eServed as the Court receives them’ (using Eastern time). The Court appreciates that its narrative on the web site may have been confusing to petitioners and that they transmitted the motion, presumably from their state of residence, Nevada, at 11:08 p.m. Pacific coast time May 15, 2015, therefore the Court shall permit the late filing of petitioners’ Motion for Reconsideration of Findings or Opinion Pursuant to Rule 161, as supplemented.” Order, at p. 1, Footnote 1.

Now the thirty-day cutoff arises under Rule 161, and not Title 26 USC, so maybe Tax Court has discretion for a reconsideration where they do not for a petition from a SNOD or NOD.

Takeaway—Practitioner, maybe so a late Rule 161 motion might be worth a try, with a sufficient tale of woe attached.

I didn’t want to end today’s blogfest without another Barbara Kupersmit coruscation.

Y’all will remember Barb. No? Well, Barb ran the giant slalom of Judge Gustafson’s conundrums (see my blogpost so entitled, 6/2/15), and came out a winner (see my blogpost “Repentance Can’t Cure Fraud,” 7/1/15).

She didn’t do so well with hubby Hal, as Judge Gustafson wouldn’t let Barb join up with Hal for this hoedown back in June, as more particularly described in my latter abovementioned blogpost.

But Barb is in there pitching. And Judge Morrison is on the receiving end, in Harold P. Kupersmit, Docket No. 22350-14, filed 8/7/15.

“This case is calendared for trial during the Court’s September 14, 2015 Trial Session in Philadelphia, Pennsylvania. On July 6, 2015, the Court filed a motion by petitioner titled:

“The Triple Power of Quo Warranto; Scire Facais; Error Coram Nobis

The Pennsylvania Internal Court System

A Cancer On The Land

If You Can’t Trust Your Court System,

Who Can You Trust?

“The motion appears to make multiple requests of the Court, including: (1) a motion for damages purportedly on behalf of Barbara Kupersmith, (2) a motion to expand the lawsuit to include relief under 5 U.S.C. sec. 702, (3) a motion to enforce subpoenas, (4) a motion for judicial notice, (5) a motion for partial summary judgment, (6) a motion for costs under 26 U.S.C. sec. 6673, and (7) a motion to shift the burden of proof.” Order, at p. 1.

Judge, her surname is Kupersmit. But I will pardon the error.

It does, however, strain my native hue of resolution, but I will resist the temptation to expatiate on Barb’s latest, except to say you gotta love a litigant who won’t quit.

Judge Morrison apparently finds Barb less than amusing: “…petitioner’s July 6, 2015 motion is denied because it impermissibly joins motions together in violation of Tax Court Rule of Practice and Procedure 54(b).” Order, at p. 1.

Must have been a long day in Judge Morrison’s division.

Cracking up once more is Steven T. Waltner, joined by Ms. Sarah V. Waltner, in 2015 T. C. Memo. 146, filed 8/6/15. I say “cracking up,” as that was the title of my first account of Steve’s maneuverings; see my blogpost “Cracking Up,” 2/27/14.

Ms. Sarah V. Waltner featured in my blogpost “A Tale of Three Lawyers,” 7/3/14.

At this juncture, lest I be accused of piling on after the whistle, I must quote from the latter blogpost. “I do not indulge in schadenfreude; I find such stuff unworthy of discussion in a high-minded blog like mine. So today’s blogpost is not a gloat over others’ difficulties, but to point the way for my readers, or their respective counsel, to avoid the pitfalls hereinbelow set forth, as my already-on-their-second-bottle-of-2003-Château-Léoville-Poyferré colleagues say.”

Steve and Ms. Sarah V. Waltner are senior-league rounders. Judge Haines catalogues their previous delicitons, and orders their now-or-former attorney, whom I’ll call Donny, to show cause why he should not be mulcted for the cost of the extra trouble and grief he caused the crew at 1111 Constitution Avenue, NW.

And Steve and Ms. Sarah V. Waltner climb another step in the Stairway to the $25K Section 6673 Chop.

“The only issue in Waltner v. Commissioner, T.C. Memo. 2014-35, was whether Mr. Waltner should be subject to a section 6673 sanction because he paid the section 6702 penalty. After a detailed discussion, which we will not reiterate here, we determined the answer was ‘yes’ and imposed a section 6673 penalty of $2,500. Petitioners did not heed our warning in that case and refused to withdraw their frivolous positions in Waltner v. Commissioner, T.C. Memo. 2014-133. As a result, we imposed yet another section 6673 penalty of $5,000 on each petitioner, for a total of $10,000, in that case.

“In this case respondent seeks the maximum section 6673 penalty of $25,000. Despite our repeated warnings that we will not tolerate petitioners’ frivolous positions and our imposition of substantial monetary penalties, we have been unable to dissuade petitioners. Petitioners continued to advance positions in this case which they had already been warned were frivolous. We find a section 6673(a)(1) sanction is warranted and impose a $15,000 penalty in total on petitioners.” 2015 T. C. Memo. 146, at pp. 16-17.

See my blogpost “Wilf,” 3/30/15. The story has an unhappy ending. You can read all about it, with “somber reasoning and copious citation of precedent,” as they say at 400 Second Street, NW, in The City L’Enfant Built, from the desk of Ch J Michael B. (“Iron Mike”) Thornton.

Ch J Iron Mike was clearly not amused by Wilf’s somewhat casual approach to Tax Court litigation.

Here’s the link. http://www.ustaxcourt.gov/press/080615.pdf

Hermine Dinger claims ADD isn’t a US government agency, and even settled a deficiency case with IRS (for different years) while getting paid by ADD, but that doesn’t help, in 2015 T. C. Memo. 145, filed 8/6/15.

ADD is nothing to do with attention deficits here; it’s the Aufsichts und Dienstleistungsdirektion. And that should evoke a first-class “Mein! Was ist das?”

Well, I’ll enlighten you, even as I was enlightened by Judge Dawson. The Aufsichts und Dienstleistungsdirektion translates to Pay Office Foreign Forces, and “‘is a German authority of the Ministry of Internal Affairs and Sports’ that administered the payroll relating to civilian employees of the U.S. Army under The Agreement Between the Parties to the North Atlantic Treaty Organization Regarding the Status of Their Forces (NATO SOFA), June 19, 1951, 4 U.S.T. 1792.” 2015 T. C. Memo. 145, at p. 4.

Hermine worked as a receptionist at the U. S. Army Dental Clinic at Friedberg, Germany, of which country she was a citizen, although, being married to a U. S. citizen, she made the Section 6013(g)(1) election to be treated as a U. S. resident.

Judge Dawson explains: “The ADD disbursed wages to petitioner. The U.S. Army provided the funds ADD disbursed to petitioner in a salary statement that stated: ‘This is not an activity of the German civil service. Payment will be made by the home country and subject to recovery’.” 2015 T. C. Memo. 145, at p. 4.

Hermine claimed the foreign earned income exclusion. IRS said she got paid by the U. S. Army Dental Clinic, and therefore Section 911(b)(1)(B)(ii) says she can’t exclude that income.

Judge Dawson spends some computer time establishing that the U. S. Army Dental Clinic is an agency of the United States. Tough call, Judge.

And all ADD did was act as payroll administrator. Hermine was directed by, hired by, and could be fired by, the U. S. Army.

Hermine claims the earlier settlement estops IRS from challenging her exclusion. But there was no finding of facts or stipulation of facts, and no briefing or trial.

“The decision document… only effected a settlement of that case. There was no stipulation of facts in support of the settlement. There was no trial or briefing on the merits of the foreign earned income issue, and there was no decision on the merits.” 2015 T. C. Memo. 145, at p. 11.

You need all that for collateral estoppel. The issue must be litigated and decided. And for Hermine’s settlement, it wasn’t.