The IRS Whistleblower Office, hereinafter referred to as the  Ogden Sunseteers, are not the sole repository of whistleblowers’ unbosomings, and if a whistleblower tells his/her tale to others of the Federales’ anointed, that doesn’t keep the whistleblower from partaking in the Section 7623 largesse.

Here’s Whistleblower 21276-13W, and pendant Whistleblower 21277-13W, filed 6/2/15, as 144 T. C. 15, from His Honor Big Julie, Judge Julian I. Jacobs, hereinafter HHBJJJIJ.

Our blower was part of a pirate CD gang, whose members stayed offshore to avoid the forces of righteousness. After the G-Men nailed the blower, he spilled that the gang hid offshore, but he could hand the Feds the gang member with the goods (hereinafter “the dude”), which the blower did not himself have.

So blower and spouse (hereinafter “Mrs Blower”) conned the dude onto the shores of our happy land, whereupon the forces aforesaid collared the dude. Facing durance vile, the dude unbosomed in extenso, whereupon the forces of righteousness scooped up a cool $74 million. Then the blower and Mrs Blower sent in Forms 211, requesting the split.

Oh no, said the Sunseteers, you filed the forms after the IRS grabbed the gold.

“The IRS asserts that the Tax Relief and Health Care Act of 2006, Pub. L. 109-432, div. A, sec. 406(b), 120 Stat. at 2959 (TRHCA sec. 406(b)), provides the Whistleblower Office with exclusive discretion to either investigate the taxpayer or refer the information provided by the whistleblower to an IRS operating division. The IRS further asserts that under TRHCA sec. 406(b) a whistleblower is ineligible for an I.R.C. sec. 7623(b) award if he/she provides the information to an operating division of the IRS before submitting the information, via a Form 211, to the Whistleblower Office.” 144 T. C. 15, at p. 2.

Before you say, “What a crock!”, let’s listen to the more genteel HHBJJJIJ.

“Oh no,” says HHBJJJIJ.

“The documents in petitioners’ administrative files were insufficient for the Court to conduct an effective review of this matter. The only documents in each petitioner’s administrative file were (1) the Form 211, (2) an acknowledgment of the receipt of the Form 211 assigning a claim number to the respective petitioner, (3) a letter informing the respective petitioner that his/her claim was still under consideration, (4) a Form 211 Classification Checksheet, and (5) a denial letter stating that the information provided did not result in the collection of proceeds.” 144 T. C. 15, at p. 4

So there was a trial, whereat it was established that the blower and Mrs Blower enticed the dude into the Land of the Free, playing upon his greed, and assisting the FBI, ICE and IRS, and even Scotland Yard, in nabbing the dude and extracting from him the tools wherewith to harvest the ill-gotten gains of the gang.

At the end of the James-Bond-type undercover derring-do, the AUSA on the case told blower and Mrs Blower “The assistance and support of * * * [petitioners] in supporting the investigation was exceptionally helpful * * * In short, but for the work, information, and effort of * * * [petitioners] in assisting the federal government, the government’s successful action against * * * [the Targeted Business], as it was carried out, would not have been possible. * * * The information provided by the whistleblower [sic] was essential and substantially contributed to the government’s actions against * * * [the Targeted Business] that led to the collection of $74,131,694.42.: 144 T. C,. 15, at p. 14.

Ya get the feeling that the sun is setting over Ogden, UT, real fast.

And before the purists amongst us denounce blower and Mrs Blower as co-felons with the dude and his friends, nota bene that when skullduggers are doing the nasty, they do not invite Archbishop Welby of Canterbury and Pope Francis to observe and rebuke them for their evil deeds.

All Ogden did was send the usual “we got no money” form. There was no 11369 Confidential Evaluation in the file, just a note from the “classifier” saying “closed – no pay” and a sign-off from the team manager, who reviewed little or nothing of the file.

The Tax Relief and Health Care Act did not make Ogden the gatekeeper of whistleblowing. The old system, pre-Ogden, worked fine as far as uncovering the nasty; implementation was lacking. It took too long for the worthy blowers to get their piece of the boodle.

“It is clear from the statute that the Whistleblower Office is charged with being the central office for investigating the legitimacy of a whistleblower’s award claim, not necessarily the underlying tax issue. To interpret TRHCA sec. 406(b)(1)(B) as respondent does would mean the Whistleblower Office is authorized to open an examination relating to a taxpayer. But the Whistleblower Office has neither sufficient staff nor institutional expertise to investigate taxpayers. See Internal Revenue Manual pt. 1.1.26.1 and 1.1.26.2 (June 8, 2010) (discussing the roles and mission of the Whistleblower Office). And were the Whistleblower Office to expand its staff and expertise sufficiently to conduct examinations relating to taxpayers brought to its attention by whistleblowers, such expansion would duplicate the resources already available in IRS operating divisions.” 144 T. C. 15, at pp. 23-24.

And if the Sunseteers started an investigation, they could blow the blowers’ cover, in direct violation of law and leading to an absurd result. Anyway, on the trial, an IRS auditor said he wouldn’t slow down the investigation to let blower and Mrs Blower file Forms 211.

“Despite respondent’s assertions, we are mindful that the Forms 211 which petitioners filed anticipate that a whistleblower may approach an operating division of the IRS before notifying the Whistleblower Office. See Form 211, Line 8, which instructs the whistleblower to provide the ‘Name & Title of IRS employee to whom violation was reported’, and line 9 which asks for the ‘Date violation reported’.

“Form 211 was revised in March 2014. It was not, and never has been, altered to discourage whistleblowers from approaching an operating division of the IRS. To the contrary, revised Form 211 expands the detail about a whistleblower’s directly contacting investigating agencies before contacting the Whistleblower Office, including providing space for the whistleblower to report any information submitted to other Federal agencies as well as State authorities. See Form 211, Line 5, which instructs the whistleblower to provide the ‘[n]ame and title and contact information of IRS employee to whom violation was first reported, if known’. See also line 6, which instructs the whistleblower to provide ‘[d]ate violation reported (in number 5), if applicable’;. And line 7 asks: ‘Did you submit this information to other Federal or State Agencies’? And Line 8, which states: ‘If yes in number 7, list the Agency Name and date submitted’. If respondent’s position were correct, these lines would be superfluous; in fact, they would be misleading to an unwary whistleblower.” 144 T. C. 15, at pp. 24-25.

I quote in extenso, for the benefit of TIGTA.

HHBJJJIJ did not rule on standard of review, because the parties did not go into the matter on the trial.

“Because it rejected petitioners’ claims as untimely, the Whistleblower Office did not conduct a review, investigation, or evaluation of the merits of petitioners’ claims for award. We believe the parties should have an opportunity to resolve these cases on the basis of our holding herein. We will require them to file a status report in accordance with an order to be issued.” 144 T. C. 15, at p. 28.

Or Maybe Not

 Joseph W. (“Fighting Joe”) Dieck, Jr., paid the tax, but has a beef about the interest mulct which IRS is seeking. So Ch J Michael B. (“Iron Mike”) Thornton has to sort out the varieties of interest abatement available to Fighting Joe in Joseph W. Dieck, Jr., Docket No. 3145-15 L, filed 6/2/15.

IRS, ever eager to spare Tax Court judges the labor of deciding cases, moves to toss Fighting Joe.

IRS claims “…(1) no notice of final determination concerning abatement of interest under Internal Revenue Code (I.R.C.) section 6404(e) as required by section 6404(h) has been sent to petitioner with respect to tax year …, and (2) petitioner has not paid the interest owed as required by I.R.C. section 7481(c) to form the basis for the Court’s jurisdiction over the determination of interest under the Tax Court Rules of Practice and Procedure, Rule 281(b).” Order, at p.1.

If Fighting Joe wants Appeals to abate, “In a case seeking review of the failure to abate interest, the Court’s jurisdiction depends, in part, upon the issuance of a valid notice of final determination not to abate interest pursuant to section 6404(e). Sec. 6404(h)(1); Rule 280(b)(1), Tax Court Rules of Practice and Procedure; Banat v. Commissioner, 109 T.C. 92, 95 (1997). Likewise, in a case seeking review of a determination under section 6320 or 6330, the Court’s jurisdiction to review certain collection activity of the IRS depends on the issuance of a valid notice of determination under section 6320 or 6330 and the timely filing by the taxpayer of a petition within 30 days of that IRS determination.” Order, at p. 2.

Of course, Fighting Joe can pay first, and then file under Section 7481.

“In addition, the Court’s jurisdiction to reopen a case to determine whether the taxpayer has made an overpayment of interest depends, in part, on the taxpayer paying the entire amount of the deficiency plus interest claimed by the Secretary and filing a motion in this Court for a redetermination of the amount of interest involved within one year after the date the decision of the Court becomes final. Sec. 7481(c)(1), (2)(ii); Rule 261.” Order, at p. 2.

But Fighting Joe has neither a Section 6404(e) notice that IRS won’t abate, nor a NOD per Section 6320 or Section 6330, and while Fighting Joe paid the tax, he hasn’t paid the interest.

So Fighting Joe is out all around.

So Ch J Iron Mike doesn’t have to deal with this one, thanks to the solicitous IRS.

When it comes to the confluence of Section 6320(b)(2)’s “one CDP per tax year” rule, IRS’s adherence to the letter of the reg, and remand-vs-opinion-as-blunt instrument, Judge David Gustafson is in his element.

See my blogpost “I’m From the Government, And I’m Here to Help”, 8/20/14.

Well, Judge Gustafson dusts off his exegesis from the Barbara Delon & Welbon Delon order, cited in my above-referred-to blogpost, and gives it a new twist in Barbara A. Kupersmit, Docket No. 13428-14L, filed 6/2/15.

IRS’s counsel admits Appeals utterly blew Barb’s CDP. “Respondent’s administrative file does not contain any of the documentation that would have been produced in support of respondent’s determination and assessment of petitioner with the frivolous return penalty for the taxable year …. Notably, respondent’s administrative file is missing a copy of petitioner’s … return that respondent determined was frivolous. Nor does the administrative file contain any correspondence, records, or other documents that respondent’s Settlement Officer should have reviewed as part of the Collection Due Process (CDP) hearing. Respondent’s administrative file also reveals that respondent’s Settlement Officer erroneously determined that petitioner was precluded from challenging the underlying liability at issue in this case during the CDP hearing.” Order, at pp. 1-2.

Looks like a slam-dunk for Barb. IRS moves for remand, so Appeals can get it right. But the case is on the calendar call for 6/15/15, so IRS wants a continuance as well.

Judge Gustafson says he’ll hear argument on those motions at calendar call, but in the meantime he catechizes Barb on her options.

She can go with the remand, fight about her underlying Section 6702 frivolous return liability, and propose collection alternatives.

She can say “no, toss the NITL,” and hope the SOL has run before IRS lobs another NITL at her. But if the SOL hasn’t run, and IRS does lob, the Section 6320(2)(b) one-shot-is-all-you-get rule, which IRS embraces, may prevent Barb from going back to Appeals and to Tax Court.

Of course, Barb could demand CDP 2, claiming same is a supplementary hearing to CDP 1, but no court has held such a thing is permissible. I do not doubt IRS will fight that one.

And Barb may want to fight the Section 6702 chop in Tax Court on the trial date.

Looks like “one the one hand this, on the other hand that” requires Barb to have more hands than an octopus.

But wait, there’s more!

“On the other hand, the asserted liability at issue here–a penalty under section 6702 for filing a frivolous return–is subject to ‘reduction … if the Secretary determines that such a reduction would promote compliance with the administration of the Federal tax laws.’ Sec. 6702(d). The statute thus appears to commit such a reduction to the Secretary’s discretion, and it is not clear whether or how such a reduction could be made subject to trial by the Court in the first instance, without any prior exercise of discretion by the Secretary (presumably acting, in this circumstance, through the Office of Appeals). It may be that the Court could review the initial determination that a frivolous return had been filed but would have to remand if the petitioner intended to seek a ‘reduction’ of that penalty. We are not aware of prior case law addressing this distinction.” Order, at pp. 3-4.

Poor little Tax Court! So many questions, and so few answers.

And if Barb’s head is not doing a 180 by this point, she’s quite a lady.

But Barb is in there pitching. With less than a month to go before trial, she moves to join hubby Harold’s deficiency for a different year (which the Court severed last September) with this case, and sent in “…a subpoena form that is not completely filled out and is missing both the name of the person subject to the subpoena and the ‘return of service’ portion at the bottom of the form.” Order, at p. 4.

Judge Gustafson bounces the form, and tells Barb to check the Tax Court website for the user’s manual for subpoenas.

And of course joinder is a nonstarter–no common questions of law or fact.

So, Barb and IRS, go argue IRS’s motions. But if Judge Gustafson denies them, go to trial.

It was a pleasure to meet Judge Marvel at the Judicial Confab in sunny North Carolina. Putting a face and a voice with a name makes a blogger’s life a treat.

Here’s a small-claimer from Her Honor that really has nothing new (the usual unsubstantiated T&E), but it gives Judge Marvel a chance to drop a first-class one-liner that really brightened my rainy New York Monday.

Meet Eric A. Amegankpoe and Nasmath A. Amegankpoe, 2015 T. C. Sum. Op. 36, filed 6/1/15.

Eric and Nas are Amway distributors and have lots of business expenses and big losses therefrom (against lots of W-2 income from their day jobs).

But proof of their business expenses is lacking.

Eric explains: “Mr. Amegankpoe testified that he had contemporaneously recorded the Amway-related travel expenses and mileage in a notebook and later transferred the information from the notebook to a spreadsheet that he maintained on a laptop computer at his home. Mr. Amegankpoe further testified that he had (1) lost the 2010 notebook during a move and (2) lost all of the data on the laptop computer in another incident in or around 2012.” 2015 T. C. Sum. Op. 36, at p. 9. (Footnote omitted).

Judge Marvel definitely isn’t buying that one.

“We decline to accept Mr. Amegankpoe’s incredible testimony regarding petitioners’ recordkeeping practices, which we find to be as believable as a student’s assertion that his dog twice ate his homework.” 2015 T. C. Sum. Op. 36, at p. 9.

No, not the texting version of the 1963 Beach Boys “Surfer Girl” hit (ma foi, is it really 52 years?). This is the story of a MIA SFR for attorney and counselor at law Jaynelle K. Bell, 2015 T. C. Memo. 101, filed 6/1/15, and it’s the kind of thing that makes me cringe to recount.

Jaynelle didn’t file for a couple years (hi, Judge Holmes), although she sent IRS a hefty check and a letter of explanation.

It seems two of her law partners were ripping off their firm and filing false income tax returns to cover their misdoings. May it not happen to any of us!

Jaynelle, fearful of filing false returns, filed no returns, but sent IRS money.

Finally, for the year at issue, after some back-and-forth crediting of payments, Jaynelle claims she filed timely (but not certified mail).

IRS claims they got nothing, and further claims they gave Jaynelle a SFR, but no SFR makes it into the record.

Jaynelle filed a 1040X years later when she got wind that IRS was claiming they never got her return.

The issues here are the Section 6651(a)(1) and (2) chops for failure to timely file and failure to pay. IRS has burden of proof on penalties, but wins on both.

Jaynelle didn’t timely file, and she didn’t credit a previous year’s overpayment to the year at issue, getting a refund instead, so IRS wins on the failure to timely file.

But what is the sum upon which the chop for failure to timely pay is computed, the SFR that never got into the record or the 1040X that Jaynelle filed years later?

Judge Buch: “The addition to tax for failure to timely pay differs from the addition to tax for failure to timely file in that the addition for failure to timely pay is calculated on the ‘amount shown as tax on such return’, instead of the ‘amount required to be shown as tax on such return’. The notice of deficiency is based on the … return Ms. Bell filed [late]…. That return shows an amount due of $1,633. However, the addition to tax for failure to timely pay appears to have been calculated by factoring in respondent’s adjustments in the notice of deficiency. This is not appropriate according to the statute. Under section 6651(g), a return prepared by the Secretary under section 6020(b), commonly known as a substitute for return, may be treated as the return filed by the taxpayer when determining the addition to tax for failure to timely pay. Respondent did not introduce a substitute for return into the record. Therefore, respondent has met his burden for the addition to tax for failure to timely pay only to the extent of the net amount due as shown on Ms. Bell’s [late-filed] return….” 2015 T. C. Memo. 101, at pp. 10-11. (Footnotes and citations omitted).

Rule 155 recount to follow.

Takeaway– “Amount shown” and “amount required to be shown” aren’t the same. Scrutinize those chops.

Prior to her retirement, Judge Kroupa waived off bifurcating the celebrated Eaton Corporation & Subsidiaries case. See my blogpost “There’s A Bifurcation In Your Road,” 6/6/14.

But The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Indefatigable, Irrepressible, Incontrovertible, Imperturbable and Impressive Foe of the Partitive Genitive, and Old China Hand…drumroll… Judge Mark V. Holmes, bifurcates Tess Siewert’s innocent spousery in a designated hitter, Jeffrey A. Siewert & Theresa M. Siewert, Docket No. 24680-13, filed 6/1/15.

Case is on for trial 6/15, but Tess’s innocent spousery is still percolating around the Cincinnati Centralized Innocent Spouse Operation (CCISO), somewhat counterintuitively located in Covington, Kentucky.

However, Jeff’s (and maybe Tess’s) alleged delictions go back fifteen years, and a speedy trial is indicated. Likewise, sorting out Tess’s innocent spousery doesn’t solve the problem of the deficiencies at bar.

“In deciding whether to bifurcate, we look to the same factors as the district and bankruptcy courts do in applying their similar rules: (1) the separability of the issues; (2) simplification of discovery and the conservation of resources; (3) prejudice to the parties; (4) suitability of bifurcating trial but not discovery. In this case, the separability of innocent-spouse issues from deficiency and penalty issues is easy — the relevant facts are nearly without overlap, and so suitable for bifurcation. There is no discernible prejudice to either side….” Order, at pp. 1-2.

Whether or not Tess is innocent, the show must go on. And this notwithstanding Judge Kroupa’s concern that one trial should fit all.

Takeaway– Watch your facts before you bifurcate.

WordPress.com, my publisher, informs me that now I have 153 followers. What a hoot!

If reviewing benchmarks for oilfield services transfer pricing is what drives your psychic testarossa, I’ve got a real thriller for you, from a Big Four accounting firm; and yes, a related person is one of the participants. Here it is: http://www.pwc.com/en_US/us/energy-mining/publications/assets/pwc-the-new-normal-rethinking-ofes-benchmarking.pdf

It’s a truism I’ve been using for the last thirty-five years or so: “Today’s gimmick is tomorrow’s commonplace.”

And Judge Halpern proves me right in Milton B. Blouke & Christine H. Blouke, Docket No. 29267-13S, filed 5/29/15.

Milt is playing the delay-of-the-game gambit, which has furnished me much blogfodder; here, it’s the Honolulu variation.

I’ll let Judge Halpern tell the tale.

“Petitioner has moved for a continuance. He states as a principal reason travel to Austin, Texas in June, to assist his daughter to renovate a house. We held a teleconference with the parties today, during which respondent objected to our granting the motion, principally on the ground that, with place of trial in Honolulu, Hawaii, which the Court only visits once a year, a continuance would postpone trial for a year. The petition in this case was filed in December 2013, and has been before the Court for 17 months. The amount of the deficiency in tax in issue is $653. We agree that a delay of another year would not serve the interests of justice.” Order, at p. 1.

I’d have given Milt a Taishoff “good try, third class,” if he’d played the Honolulu variation a year ago.

But by now it’s a cliché.

No, not the Bill LaBounty – Cliff Downs 2009 truckdriving ballade.

This is the story of California’s somewhat idiosyncratic corporate revival statute, and how it deals with corporations “recalled to life,” as Charlie Dickens would say, after they underwent the California Franchise Tax Board’s guillotine, but rose to new life after coming clean with CFTB.

Judge Morrison has this one, and his designated hitter stars San Jose Forest Products, Inc., Docket No. 12866-14, filed 5/29/15.

CFTB nailed the Foresters and shut them down for about ten months. Immediately prior thereto, IRS piled on some seven-figure deficiencies and six-figure penalties. The Foresters sent in what would have been a timely petition, but for the fact that CFTB had guillotined the Foresters two months before they mailed the petition.

The Foresters were subsequently recalled to life. IRS says no jurisdiction, Foresters say “nunc pro tunc,” which means “recalled to life means we were alive all along.”

Not for Tax Court purposes, says Judge Morrison.

Remember poor old David Dung Lee, M.D., Inc., 22 Fed. App. 837 (9th Cir., 2001)? Ninth Circuit affirmed Tax Court, holding that petition filed while California corporation was among the dead is not revivified when the corporation is recalled to life.

Although Rule 60(c) says corporate power to litigate in Tax Court is determined by State law, “Jurisdictional statutes such as section 6213(a) are conditions on the waiver of the Federal Government’s sovereign immunity and must be strictly construed. See Bowen v. City of New York, 476 U.S. 467, 479 (1986). Section 6213(a) provides that a petition may be filed by the taxpayer during the 90-day period. * * * [The taxpayer’s] suspension under Cal. Rev. & Tax Code sec. 23301 deprived it of the capacity to sue under section 6213(a) and prevents its corporate revival from prejudicing * * * [the Commissioner’s] defense of lack of subject matter jurisdiction.” Order, at p. 3, citing Med. Weight Control Specialist v. Commissioner, T.C. Memo. 2015-52, at *7.

No, I didn’t blog it, because I thought it was just a rehash of a number of other CA turnarounds I had blogged.

But the Foresters have one last twig to which to cling, the CA “procedural vs substantive” faceoff, whereunder most litigation acts are deemed procedural, and therefore retroactively validated when the corporation comes clean.

OK, says Judge Morrison, but SOLs are substantive under CA law, and in our CA turnaround cases we treated the 90-day rule in Section 6213 as substantive.

Yes, Tax Court didn’t use the exact words “substantive vs procedural.” He didn’t add “so sue us,” but he must have thought it very loudly.

Section 6213 is substantive, so the California Turnaround doesn’t help.

Correction, 5/30/15 – Should be the Red Simpson California Turnarounds song.