No, not me, STJ Lewis (“The Name Correctly Spelled”) Carluzzo, in a designated hitter on a day when good blogfodder is in short supply. Not much of a big noise on Guy Fawkes’ Day, for my UK readers.

The designated hitter is Wayne D. Ramsey, Docket No. 15959-14, filed 11/5/15.

Wayne D. wants STJ Lew to take judicial notice of his two Forms 1040X for the year in dispute, and he attaches these to his motion papers.

No can do, says STJ Lew.

“Although the parties may ultimately agree upon petitioner’s… Federal income tax liability and deficiency, if any, establishing those amounts by judicial notice as requested in petitioner’s motion is not appropriate. Only facts that are not subject to reasonable dispute may be judicially noticed. See Rule 201(b), Federal Rules of Evidence; I.R.C. §7453.” Order, at p. 1.

But there is a dispute. The petition and answer show the parties dispute Wayne D.’s liability, and nothing since the time for pleadings or amendments thereto has closed shows the parties resolved the dispute.

So go fight it out, guys. Or settle.

Although his/her name is not mentioned in Eric Edward Chandler, 2015 T. C. Memo. 215, filed 11/4/15, and EE is pro se in this one, EE’s now-or-former attorney is my kind of lawyer.

EE offered an OIC of $2938 against tax liabilities exceeding $600K, claiming collectability. But EE is a long-time rounder.

Judge Lauber: “Petitioner has been a frequent visitor to this Court. This case involves his Federal income tax liabilities for 1988, 1989, 1990, 1991, 2005, and 2008.” 2015 T. C. Memo. 215, at p. 2 (Footnote omitted, but it details EE’s prior interfaces with Tax Court, all of which he lost).

EE now claims he was diagnosed with cancer, and his medical expenses went from $144 to $310 per month.

But during three of the years at issue, EE drew $400K from his retirement accounts, and was evasive about what he did with it when speaking to the SO (who rejected EE’s OIC and EE rejected the SO’s short-term deferred payment offer). But he sure didn’t pay his income taxes with any of it.

Looks like dissipation of assets, no? It did to the SO and Judge Lauber. And dissipated assets get hauled back into RCP.

So Judge Lauber sustains the rejection of the OIC and sustains the NFTL.

But the good part is EE’s trial testimony. It must have endeared EE to Judge Lauber.

“When questioned at trial about his retirement account withdrawals, petitioner testified that his lawyer had advised him to withdraw the money and ‘just go spend it.’ He testified that he spent this money ‘on anything and everything’; that he had no records of what he spent the money on; and that he simply ‘had a good time.’” 2015 T. C. Memo. 215, at p. 6.

With pardonable restraint, Judge Lauber repeats EE’s jolly admission.

“The SO gave petitioner multiple opportunities to explain how he disposed of the funds he withdrew from his retirement accounts…, but he made no effort to do so. His testimony at trial that he ‘had a good time’ spending the funds on ‘anything and everything’ would not support the conclusion that the assets in question were expended for essential living expenses. We find that the SO did not abuse her discretion by treating petitioner’s retirement account withdrawals as ‘dissipated assets’ and rejecting his OIC for that reason.” 2015 T. C. Memo. 215, at pp. 9-10.

Gotta love EE’s attorney. I wish I could give my clients that kind of advice.

Trudging through Tax Court orders seeking the odd gem to blog is wearisome, but sometimes one feels a wave of pity for those entrapped by the IRC and the Tax Court’s Rules.

Here’s that horsey litigant (and winner) Denise Celeste McMillan, Docket No. 3720-12, filed 11/3/15. You’ll remember Denise won back in June. You don’t? Then re-read my blogpost “Who Would These Burdens Bear,” 6/12/15.

So Prevailing (or Prevalent?) Denise wants her legals and admins per Section 7430.

She doesn’t get them, and Judge Halpern is here to tell you why.

“Rule 231(a)(2)(A), Tax Court Rules of Practice and Procedure, provides that a taxpayer claiming litigation and administrative costs, where no agreement as to taxpayer’s entitlement to such costs exists, must file a motion with the United States Tax Court within 30 days after the service of a written opinion determining the issues in the case. T.C. Rule 231(a)(2)(A). Petitioner filed the motion more than 30 days from the date the written opinion was issued in this case. We issued our memorandum opinion in this case on June 11, 2015. Petitioner had until July 11, 2015, to file her motion. Petitioner filed the motion on September 25, 2015, which is 106 days from when we issued our memorandum opinion. Accordingly, the motion is not timely. Petitioner’s citation to 28 U.S.C. section 2412(d)(1)(B) is inapposite, in that 28 U.S.C. section 2412(e) expressly excludes from its coverage ‘any costs, fees, and other expenses in connection with any proceeding to which section 7430 of the Internal Revenue Code of 1986 applies’.” Order, at pp. 1-2.

And here’s an even sadder tale, Wayne Robert Wilson, 22626-14SL, filed 11/3/15. The Judge With a Heart, STJ Armen, tried to help Wayne Robert, who is in dire straits, but the Judge’s helping hand didn’t satisfy Wayne Robert.

Back in August, STJ Armen remanded Wayne Robert back to Appeals. Appeals gave Wayne Robert a CNC NOD. Wayne Robert is not thrilled, however, even though IRS’s hand is stayed. He writes to STJ Armen.

“Judging from petitioner’s letter…, it is hard to know whether petitioner regards currently-not-collectible (CNC) status satisfactory. Clearly the import of the petition and other filings by petitioner is that he is in dire financial straits and is unable to pay his assessed liabilities for the years in issue. One might therefore think that he would be pleased to know that levy action is suspended while his account is in CNC status and that he ‘would not be required to make periodic payments, other than refund offsets from Federal and State Tax Returns, while the account is classed as such.’ After all, petitioner implies that he would pay his liabilities if his financial situation were to change dramatically for the better. In any event, petitioner’s concern that CNC status ‘does not resolve anything, plus it adds a lien against me’ would appear to be inaccurate in that the instant case involves a proposed levy and, as far as the record reveals, no notice of Federal tax lien has been filed to date. Further, petitioner’s hope for tax relief in the form of income averaging is unavailing in view of the fact that income averaging was repealed from the Internal Revenue Code many years ago and, in any event, was designed to ameliorate rapidly increasing income and not the converse (which seems to have been petitioner’s situation).” Order, at pp. 1-2.

I lamented the end of income averaging, as for many years before and after my income varied widely from year to year. But income averaging died with advent of the celebrated Internal Revenue Code of 1986.

So STJ Armen has no further means of facilitating a “quick and simpler path to resolution” of Wayne Robert’s problem. Back to the trial docket goes Wayne Robert.

That Obliging Jurist and true friend of the hard-laboring blogger, Judge David Gustafson, may or may not find that Holman M. Fulbright, Docket No. 379-15L, filed 11/2/15, though not currently compliant with all filings, may yet attain the limbo of CNC. And, praise be, he does so in a designated hitter.

Holman is out of luck in his quest for an installment agreement. Ya gotta have filed all returns and paid any 1040-ES, 941 and suchlike, before you can pay as you go.

IRS wants summary J that Holman is out on CNC as well. And thereby hangs the cliché.

IRS claims Holman never came clean on the diñero. Holman’s trusty attorney claims he faxed fifty-plus pages of Holman’s monetary life and miracles, and got a fax receipt therefor. IRS ripostes that trusty attorney’s averments are a wee bit dubious, to be charitable.

Judge Gustafson sorts it out. “But in the current summary judgment context, we decline to weigh the evidence or do any more than identify the presence or absence of a genuine dispute of material fact. See Rule 121(b).

“However, Rule 121(d) does require that ‘certified copies of all papers or parts thereof referred to in … a declaration shall be attached thereto or filed therewith.’ This rule would seem to require that the ‘financials’ referred to in counsel’s statement be filed with petitioner’s response, but they were not. We will allow petitioner to cure this defect in a supplemental filing.” Order, at p. 2.

In short, trusty attorney, produce documents and receipt.

Yet another complication arises, but Judge Gustafson is ahead of the problem.

“Petitioner’s counsel’s declaration states that he has changed law firms since the events [in question]. The Court therefore points out that, to the extent (if any) that petitioner needs documents that require the cooperation of that former firm but the firm is not cooperating, petitioner’s remedy would be to compel production of documents by the issuance of a subpoena duces tecum under Rule 147(b), requiring the firm to appear at the calendar call and produce the documents. Failure to employ that remedy would presumably redound to petitioner’s detriment in any dispute about whether petitioner had met his burden of proof (and in any dispute about the appropriateness of a continuance).” Order, at pp. 2-3.

And of course, if the facts are still at issue, get ready for trial.

Or Maybe Not

This is the answer to the Car Werks conundra, for which see my blogpost “Is An LLC a Person?”, 9/11/15.

Well, STJ Armen, The Judge With a Heart, doesn’t have to go there, as IRS unscrambles the omelet it created in Car Werks, LLC, David M. Palmer Sole Member, Docket No. 12067-15L, filed 10/30/15, IRS filed a lien naming both the LLC and Dave. Dave claims he was wrongfully liened, as he never got a NFTL, but after the doings reported in my aforementioned blogpost, IRS pulled the recorded lien and filed anew only against the LLC, not Dave. And the only NOD issued is against Car Werks, LLC, not Dave.

IRS wants TFRPs from Dave, but ever since 9/14/09, TFRPs in respect of LLCs are assessed and collected as if the LLCs were corporations, notwithstanding the check-the-box regulations. But so far Dave got neither a SNOD nor a NOD for those.

So STJ Armen, after wading through the papers both sides laid on him after his earlier order, straightens everyone out.

First, a NOD is the ticket to Tax Court, and here the only NOD was issued to Car Werks, LLC.

“Further, as discussed at length in the Court’s Order dated September 11, 2015, the instant case resembles more a case commenced and prosecuted by David M. Palmer than it does a case commenced and prosecuted by Car Werks LLC. Under the circumstances present here and as discussed, the Court lacks jurisdiction over David M. Palmer. Likewise, and as the parties were advised in the September 11, 2015 Order, the Court’s jurisdiction does not extend to awarding damages for ‘malicious lien filing’ and that any remedy for damages that may exist for ‘malicious lien filing’ lies in another court. See, e.g., I.R.C. secs. 7432, 7433.” Order, at p. 2.

Car Werks, LLC, can, if it wishes, get into the act by ratifying Dave’s petition (manually signed by Dave on behalf of the LLC, and not by his attorney), but dropping the malicious lien stuff.

If Car Werks LLC does, then “…this Court would most likely, by subsequent Order, require (1) counsel seeking to represent Car Werks LLC to file an entry of appearance for Car Werks LLC if counsel wished to represent Car Werks LLC in the instant action; (2) Car Werks LLC (acting on its own behalf or through counsel if the requisite entry of appearance were to be filed) to file an amended petition that is responsive to the April 16, 2015 Notice Of Determination that was issued to Car Werks LLC (but not to assert any claim for damages for “malicious lien filing”); and (3) Car Werks LLC to comply with the Court’s May 15, 2015 Order For Ownership Disclosure Statement.” Order, at p. 4.

STJ Armen did such a good job clearing up IRS’ initial blunder that it seems an unfair quibble to suggest that, whether or not counsel wishes to represent Car Werks LLC, the wishes of Car Werks LLC through its member-manager are paramount.

On another topic, Peter Reilly, CPA, Forbes’ formidable blogger, asked if I had any comment on Estate of Edward S. Redstone, Deceased, Madeline M. Redstone, Executrix, 145 T. C. 11, filed 10/26/15.

I replied I did not, as the case is fact-specific and, to the extent Sumner Redstone, the Viacom King, was involved in this transaction, I have blogged that in my blogposts “The Flavor Du Jour,” 12/9/13, and “Bonanza,” 1/3/14.

Reflecting, it might just be that Edward’s favorable result bails out Sumner as well, as IRS’s case depends upon various stock transfers being gifts, and Edward beat that one. But I’d need to see more facts before coming to that conclusion. And that’s why I’m reserving comment at this time.

We Have a Special Discount

IRS repeats the words of Frank Puglia, who played the Moroccan rug merchant in that unforgettable scene from Casablanca. PTIN holders, your renewal will now cost $50.00, down from $64.25.

There’s also some change to non-credentialed preparers.

Read all about it.

After a month spent navigating the public transport systems of seven cities in four countries, I can sympathize heartily with Candis L. von Lossow, 17050-15, filed 10/29/15. Candis wants a transfer, but Ch J Michael B. (“Iron Mike”) Thornton says no.

Candis asked Tax Court to reverse a disallowed refund claim, and sent in all the billets doux she exchanged with IRS.

That, of course, doesn’t fly.

“Thus, the record at this juncture suggests that petitioner sought the assistance of the Court after having become frustrated with attempts to work administratively with the IRS but that the petition here was not based upon or instigated by a specific IRS notice expressly providing petitioner with the right to contest a particular IRS determination in this Court. Suffice it to say that none of IRS communications supplied by petitioner to date constitute, or can substitute for, a notice of deficiency or a notice of determination issued pursuant to sections 6320 and/or 6330, I.R.C…, or any other of the narrow class of specified determinations by the IRS that can open the door to the Tax Court.” Order, at p. 3.

OK, says Candis, so ship this case to the USDC or USCFC.

No transfers here, says Ch J Iron Mike.

“The United States Tax Court is neither a United States District Court nor the United States Court of Federal Claims. … the Tax Court also has not been granted the ability to ‘transfer’ cases or venue to other Federal Courts, and taxpayers need to file a separate petition or complaint directly with those courts.” Order, at p. 3. (Citation omitted).

If you remember my blogpost “An Unsettling Settlement,” 10/3/11, you’ll remember judges look to see what the parties really settled, not what they claimed the settled, when deciding if settlement proceeds are taxable, and, if they are, how they are characterized.

So it clearly behooves practitioners to make sure they buttress any deductibility or characterization claim in a settlement agreement.

In New York, too often cases get settled with nothing more than a stipulation of discontinuance with prejudice, and an exchange of form general releases.

I like settlement agreements. They need not be filed (in fact I won’t file unless a court orders filing, and I’ve never seen that). But they can be mighty handy.

This is the lesson Judge Laro teaches Ronald Lawson and Karen Bey, 2015 T. C. Memo. 211, filed 10/28/15.

Ron sued Bank of America twice, alleging a total of $68K was abstracted from his accounts due to BOA’s negligence and breach of fiduciary duty.

Karen has enough troubles of her own, which take up most of the opinion, but they’re the non-substantiation type and fact-driven, so I’m sticking to Ron’s story.

Ron settles both lawsuits for a $40K payout. Ron only gets $31K, because his lawyer and court costs get paid. But the only documents are a stip of discontinuance and a form general release; no agreement stating what was settled.

Ron claims he only got back the money that was wrongfully taken from him, thus no accretion to wealth. IRS claims that you can’t tell what was settled from the documents, the burden is on Ron, and he can’t carry it with the paper he has.

I note in passing that Judge Laro is an accomplished tax practitioner, but it would seem he hasn’t done much general litigation. My offer of proof for the foregoing: “The general release and the stipulations are silent as to whether the payment was supposed to restore funds taken from Mr. Lawson’s account or was just to get rid of a nuisance lawsuit.” 2015 T. C. Memo. 211, at pp. 29-30.

Judge, no one settles a “nuisance lawsuit” where the claim is $68K for $40K. At best, if the lawsuit really has nuisance value, the offer might be $5K. A settlement at nearly two-thirds of the demand means plaintiff had a case.

Howbeit, here’s the warning for New York lawyers (and others): “Under the origin of the claim doctrine, courts look into the nature of the underlying claim to determine whether a settlement payment or judicial award is excludible from gross income and to determine the proper tax treatment of the proceeds. Courts look to the terms of a settlement agreement to determine whether a settlement is taxable. Where the agreement is silent as to the basis of the settlement or where the agreement does not specify that the payment was for a reason that a court finds to be nontaxable, this Court has held the settlement payment to be taxable.” 2015 T. C. Memo. 211, at pp. 28-29. (Citations omitted).

Of course Ron was pro se, and the opinion doesn’t disclose if he asked his attorney to testify.

Granted, negotiating the settlement agreement might be just as much work as negotiating the deal that gave rise to the settlement. But, if done right, it might save the client a lot of tax.

Offers in compromise are a big hit on the midnight TV circuit. And the results are often less than what the pitchmen promise. “The average taxpayer is inundated daily with television and radio ads placed by national taxpayer assistance companies that brag of their ability to obtain ‘pennies on the dollar’ tax relief from the IRS. The IRS can reduce the negative impact that these companies have on both the taxpayer and the IRS by posting simple and easily available information on its website to educate the taxpayer in readily available collection options.” IRSAC Small Business/Self-Employed Subgroup Report, 3/16/15, Issue Four.

Yes, make it simple. But let the offeror know that with the rose comes a thorn. Even The Judge With a Heart, STJ Armen, must bring this truism home to Millicent Stewart, Docket No. 28216-14L, filed 10/27/15.

Millicent’s OIC gets accepted after she raises the ante. But IRS’ acceptance letter says they’ll file a NFTL until Millicent pays in full. And IRS does.

Millicent fires off a Form 12153, and files in bankruptcy.

Millicent’s underlying tax liabilities are nondischargeable, and she never raised liability when she had the chance. STJ Armen also notes Millicent’s spouse got innocency for one of the years at issue.

Millicent says she didn’t understand about the lien. She thought IRS would lien if she didn’t pay, and she did pay.

STJ Armen: “Petitioner argues that respondent did not explain what the offer entailed and that she understood the terms to mean that a lien would only be filed if she defaulted on the offer-in-compromise. Although it is regrettable that petitioner misunderstood the Form 656, she has not shown that the settlement officer abused his discretion or otherwise contravened the express terms of the offer-in- compromise that petitioner signed. Moreover, the terms on the Form 656 were necessary for petitioner’s offer to be accepted; indeed, if her offer had not included the terms, then the offer would not have been a valid [sic]. See Schropp v. Commissioner, T.C. Memo. 2010-71, aff’d per curiam, 405 Fed. Appx. 800 (4th Cir.2010),wherein this Court stated (at*9) that if the taxpayer’s offer-in- compromise ‘had not included the prescribed terms [regarding the Commissioner’s right to file a notice of Federal tax lien in order to protect the Government’s interest on a deferred payment offer], then it would not have been a valid OIC’ and that ‘a notice of lien may properly be filed while an OIC is under consideration or after it is accepted.’ See Baltic v. Commissioner, 129 T.C. 178, 180 n.4 (2007); Taggart v. Commissioner, T.C. Memo. 2013-113, at *6; see also Green v. Commissioner, T.C. Memo. 2014-180.” Order, at p. 6.

Takeaway– How many of these TV gurus tell their customers the whole story? Practitioner, make sure that you do.

Unlike The Judge With a Heart, STJ Armen, Judge Lauber won’t give a do-over to Anonymous, 145 T. C. 10, filed 10/26/15.

You’ll no doubt recall STJ Armen’s largesse to Pete Disimone, more particularly bounded and described in my blogpost “A Do-Over,” 1/11/13.

Well, Judge Lauber says he can’t do that, confined as Tax Court is by the strictures of Section 6110(a).

This case is so anonymous that even counsel’s names (both sides) are sealed.

Anyway, Anonymous got its Section 501(c)(3) qualification revoked retro to Date One, IRS claiming inurement among other delicitons. Anonymous sued, and IRS settled, withdrawing Revocation One and substituting Revocation Two.

Oh yes, Anonymous stumped up an agreed amount to cover tax liabilities.

Now Anonymous wants Tax Court to order IRS to delete Revocation One from public view. Both sides admit that the statutory redactions were made to Revocation One, and have agreed to the statutory redactions for Revocation Two.

“Congress mandated in section 6110(a) that ‘the text of any written determination and any background file document relating to such written determination shall be open to public inspection’ except as otherwise provided in section 6110.” 145 T. C. 10, at p. 9.

It’s true that IRS has to give 60 days’ notice of its intent to make the written determination public, and the aggrieved party can petition Tax Court. But Section 6110(f)(3)(A) only lets the aggrieved party get “…a determination with respect to that portion of such written determination or background file document which is to be open to public inspection.” 145 T. C. 10, at p. 11.

Hence Judge Lauber’s handcuffs. “By limiting our role to the making of a determination ‘with respect to that portion of such written determination,’ that shall be disclosed, the statute restricts our jurisdiction to deciding the propriety of the Commissioner’s proposed deletions. This limitation on our jurisdiction is confirmed by section 6110(m), which provides that the Commissioner ‘shall not be required by any Court * * * to refrain from disclosure’ of any written determination whose disclosure is mandated by section 6110(a).” 145 T. C. 10, at p. 11.

You can see it’s not looking good for Anonymous.

Revocation One was clearly a written determination, with all the right redactions. And it was “issued,” because mailed to Anonymous.

Anonymous’ claim that Revocation One was erroneous, citing IRM pt. 32.3.1.12.1 (Aug. 11, 2004), cuts no ice. Even if IRM had the force of law or regulation (it doesn’t of course), there’s no obvious error or omission. IRS settled to avoid hazards of litigation (and judges love settlements), and so did Anonymous.

“Neither the statute nor the regulations provide any support for petitioner’s submission that a written determination that has been properly ‘issued’ can be ‘un-issued.’ Indeed, the regulations create a strong inference to the contrary. They provide that ‘background file documents,’ which normally are disclosable under section 6110(a), do not include ‘a request for a ruling or determination letter that is withdrawn prior to issuance thereof.’ Sec. 301.6110-2(g)(2)(v), Proced. & Admin. Regs. This regulation shows that the Department of the Treasury knew how to exclude a ‘withdrawn’ document from disclosure when it so intended, and it made this exclusion available only when the document is withdrawn ‘prior to issuance’ of the ruling or determination letter. The regulations contain no provision that would exclude from disclosure a ruling or determination letter, or background document relating thereto, that is withdrawn after the written determination has been issued. 145 T. C. 10, at pp. 18-19.

We come to the real point–Anonymous wants the inurement part out, lest their donors should feel they were swindled and sue.

“…respondent [IRS] has admitted that, at some point during the ensuing negotiations, it ‘withdrew the inurement grounds for revocation.’ In light of this admission, petitioner urges that respondent be restrained from disclosing the section of the examination report discussing private inurement in order to prevent ‘public confusion.’” 145 T. C. 10, at p. 20.

Tough. “There is no legal basis for this argument. Section 6110(c) specifies seven categories of information that must be deleted from documents made available for public inspection under subsection (a). The parties have stipulated to the deletions that section 6110(c) requires, including the deletions that are required to the ‘private inurement’ section of the examination report. The statute authorizes no further deletions…. And to the extent petitioner is arguing for an equitable exception based on the supposed risk of public confusion, ‘[s]ection 6110(f)(3)(A) is a precise grant of jurisdiction and does not allow for additional general remedies.’” 145 T. C. 10, at p. 21. (Citation omitted).

I will not cite to the several cases I have heretofore blogged, which convey the warning that a stipulation “is not by any to be entered into unadvisedly or lightly; but reverently, discreetly, advisedly, soberly,” to use words suitable for a much more solemn occasion than this blogpost.

You have been warned.