Target and Neiman-Marcus were bad enough, but now these cybercriminals have besmirched the fair name of the United States Tax Court.

From the Tax Court website homepage today, 2/6/14:

“SCAM ALERT: The United States Tax Court has been notified of individuals receiving an official looking letter/e-mail which appears to originate from the Court and solicits money from its recipient.  Please be aware the United States Tax Court does not solicit money via letter or e-mail.   If you are in receipt of such a solicitation letter or e-mail, please immediately report it to the Internet Crime Complaint Center (IC3 – www.ic3.gov) and your local law enforcement office.”

No opinions or designated orders again today, 2/5/14, so again the diligent blogger trudges through volumes of “pay the $60 already” and “Simon Says answer the motion”.

The alternative is to romp through the muddy field of Rev. Proc. 2014-16, effective 1/24/14, among whose purposes are to provide: “…the procedures by which a taxpayer may obtain the automatic consent of the Commissioner of Internal Revenue to change to the methods of accounting provided in §§ 1.162-3, 1.162-4, 1.263(a)-1, 1.263(a)-2, and 1.263(a)-3 of the Income Tax Regulations and §§ 1.162-3T, 1.162-4T, 1.263(a)-1T, 1.263(a)-2T, and 1.263(a)-3T of the temporary regulations. This revenue procedure also modifies Rev. Proc. 2011-14 and provides the procedures by which a taxpayer may obtain the automatic consent of the Commissioner of Internal Revenue to change to a reasonable method described in § 1.263A-1(f)(4) for self-constructed assets and to change to a permissible method of accounting under section 263A(b)(2) of the Internal Revenue Code and § 1.263A-3(a)(1) for certain costs related to real property acquired through foreclosure, by deed in lieu of foreclosure, or in another similar transaction. Finally, this revenue procedure also modifies section 3.0 of the APPENDIX of Rev. Proc. 2011-14 regarding a change to the method of accounting described in Rev. Proc. 2011-43, 2011-37 I.R.B. 326, for taxpayers in the business of transporting, delivering, or selling electricity.” Rev. Proc. 2014-16, at pp. 1-2.

Sorry, readers, this is not my primary area of interest. I leave that sort of thing to the trade press, where battalions of CPAs at Big Whatever-The-Number-Is firms grind out newsletters, blogs and webinars.

No, today I would respectfully draw the reader’s attention to an off-the-bencher from The Judge Who Writes Like a Human Being, a/k/a The Great Dissenter, Judge Mark V. Holmes, decided 1/10/14, but filed 2/5/14, Lori A. Harris, Petitioner and Kenneth Donnelly, Intervenor, Docket No. 14290-12.

As is obvious, this is a Section 6015 innocent-spouser. All the facts are stipulated.

Lori and Ken split during the year at issue, but Ken prepared the joint 1040, and had Lori come over at 9 p.m. on April 15 of the next year, put the form in front of her and told her to sign. They’d never had tax troubles before, Lori says she was tired, had no time to get to a tax pro to scope out Ken’s arithmetic, so she signed.

Ken disclosed all their income and took no unwarranted deductions. But he didn’t include the 10% Section 72(t) chop for premature withdrawals from his IRA.

So IRS hits them both with a $6300 deficiency and a $1300 penalty. Lori claims innocence, IRS says no, and Lori petitions. While her petition is pending, IRS’ trial counsel agrees Lori is innocent, but Ken intervenes (as is his right, says Judge Holmes; when Judge Holmes makes remarks like that about a party, that party is in for a rough trip).

IRS’ guidelines are now found in Rev. Proc. 2013-34. See my blogpost “Innocence Is Bliss”, 1/6/12, which I optimistically subtitled “Less Work for Us Tax Court Bloggers?”. There was plenty of work until Rev. Proc. 2013-34 became final, but here it is, retroactively applied by its terms to Lori.

And though Tax Court must consider the guidelines in Rev. Proc. 2013-34, Tax Court isn’t bound by them.

Lori and Ken weren’t making fraudulent transfers (transfers pursuant to a divorce decree don’t count), knowingly trying to defraud the government, or hiding assets, and Lori’s sole basis for innocence is Section 6015(f) equitable relief. Now the issue of whose tax incident gave rise to the deficiency is a little tricky, as Lori and Ken were Californians, and the Bear Republic is community property country, so Lori has a one-half share in Ken’s IRA distributions under local law. But there’s a savings clause in Rev. Proc., 2013-34 that lets innocent spouses off the hook if they’re only on the hook because of community property laws.

So Lori crosses the Rev. Proc. 2013-34 threshold; now to see if she can pass the balancing-of-factors test. Judge Holmes: “The general rule is that I have to look at all the factors and all the facts and circumstances, and that I’m not limited to any particular group of factors. Nevertheless, as Tax Court has generally done, we look at the Revenue Procedure in effect at the time. This is particularly noteworthy in this case, because the current Revenue Procedure in Section 3.01 states that this Revenue Procedure ‘gives greater deference to the presence of abuse than [previous Revenue Procedures]. The Service  recognizes that the issue of abuse can be relevant with respect to the analysis of other factors, and can negate the presence of certain factors. This change is entitled to give greater weight to the presence of abuse when its presence impacts the analysis of other factors.’” Order, at pp. 9-10.

Now abuse is not defined in any of the Rev. Procs., old or new, except that it’s less than duress. Duress means “…any constraint of will so strong that it makes a person reasonably unable to resist demands to sign a return.” Order, at pp. 10-11.

But that negates innocent spousery, because a return signed under duress is not a joint return at all.

“But it’s abuse as a factor by itself, and not just as a relevant bit of evidence about one spouse’s state of knowledge, that I’m looking for in this case. It’s an important point because it liberates me from focusing on the moment the return is signed. The relevant abuse here precedes that moment. And there’s no suggestion in any of the Revenue Procedures, including the current one, or any other source of relevant law that limits my consideration to whether a spouse was abused only to abuse that causes a particular instance of non-compliance with the tax law.” Order, at p. 11.

So it’s not only “sign or I’ll slug you”, but rather a pervasive pattern.

Now, as Judge Holmes said in Brett Van Alen and Kimberlee Van Alen, 2013 T. C. Memo. 235,  pay attention: “This leads to the heart of my inquiry on this particularly important factor. What is abuse for purposes of innocent spouse relief? If there was verifiable physical harm, that would likely be sufficient. And here, in fact, there was verifiable physical harm to the two daughters, albeit not Ms. Harris, caused by Mr. Donnelly.” Order, at p. 12.

But there’s what lawyers call a caveat: “One has to be aware of the danger that requesting spouses, in trying to escape financial liability, may easily exaggerate the level of non-physical abuse. Innocent spouse cases often spring from the dissolution of troubled marriages, and there’s an obvious incentive to vilify the non-requesting spouse.” Order, at p. 12.

Ken never abused Lori, only their two daughters, causing permanent injury to one child’s shoulder, and constantly belittling them, to the point that neither wanted anything to do with Ken. You can read for yourself what Judge Holmes found in the divorce proceedings; it isn’t pretty.

But it’s enough to cause Judge Holmes to find Ken abused Lori.

“In the applicable Revenue Procedure, the Commissioner has instructed his employees– and I think it’s a good thing, and the Court will do it as well in this case– that abuse of the requesting spouse’s child or other family members living in the household may constitute abuse of the requesting spouse, depending on the facts and circumstances….” Order, at pp. 16-17.

Going through the factors, Judge Holmes tosses Ken and holds Lori innocent.

It’s unfortunate this off-the-bencher can’t be cited. But it sure can be argued.

Your transcripts, I mean.

IRS has a weblink that allows taxpayers to obtain, online, Tax Return, Tax Account, Record of Account, or Wage and Income transcripts or a Verification of Nonfiling Letter. PTIN-holders with POAs cannot access the site; it’s strictly the taxpayers their own selves.

So if you’ve nothing to do on this icy day, paste this in your URL bar: http://www.irs.gov/Individuals/Get-Transcript. And read on.

No, not the weather forecast for NY or DC, although it might well be, as we anticipate yet another snowdump tomorrow. In fact, I spent a good part of today closing a transaction for a former boss who had gone to Alaska this week to get warm.

Rather, it looks like IRS is mulling over what course to take post-Rand. See Avraham C. Schutz, Docket No. 30420-12S, filed 2/4/14, a day of no opinions and no designated orders, which throws the hard-working blogger back on the unopinionated and undesignated.

Looks simple, right? Judge Lauber: “This case involves refundable credits and the accuracy-related penalty under I.R.C. § 6662(a). Respondent is requesting additional time to file an additional status report or submit decision documents after considering its position in relation to the Court’s recent opinion in Rand v. Commissioner.” Order, at p. 1.

Of course Judge Lauber gives IRS more time. The parties offered a stip of settlement on the trial date in November, Judge Lauber gave them until January to file decision docs, and IRS, albeit late, asked for more time. Judge Lauber doesn’t say whether or not Av objects, but gives IRS until April to let him know what gives.

Now we all remember Rand, right? If not, see my blogpost “The Rebate Debate – Part Deux”, 11/18/13, the story of Yitz and Shul Rand, and how IRS wanted to slug them with an understatement penalty when their tax due went below zero, by including the claimed refundable Additional Child Tax Credit as an underpayment. For further details, see also my blogpost “The Rebate Debate – Redivivus”, 11/22/13.

Tax Court was not amused, and I thought IRS was pulling in its metaphorical horns, even though no Action on Decision has yet floated my way through the Internet.

So what’s to consider? Maybe an appeal? Maybe a Notice?

Stay tuned.

Top Ten claimant among the Bard’s most famous sonnets (no. 18) gives me the segue into today’s small-claimer from the word processor of Judge Daniel A. (“Yuda”) Guy, Roj Carl Snellman and Patricia Snellman, 2014 T. C. Sum. Op. 10, filed 2/3/14.

Roj was employed away from home for part of the year at issue, but was he indefinite or temporary? And that, as another poet has said, made all the difference. Roj, living with wife and children in Florida, was employed for a single-shot project by an outfit called U. S. Fidelis, Inc., headquartered in Missouri, whence Roj was required to hie himself to work. While he was told he had an annual salary, he was hired in May for a term to end no later than December 31.

Well, rough winds did shake the darling buds of May, and Roj got canned November 2.

Roj claims he stayed in a local hotel from May 25 to June 10, but can produce neither credit card slip nor hotel bill. But from June 10 until he was discharged on November 2, he leased an apartment. And he negotiated an “early-out” clause in the lease, “which stated that if he lost his job with Fidelis and provided the landlord with 30 days’ written notice, he would be permitted to terminate the lease without having to pay a ‘lease break fee’”. 2014 T. C. Sum. Op. 10, at p. 4. So even though the lease term was through 12/31, Roj could walk sooner for free.

Judge Yuda: “Section 162(a)(2) allows a taxpayer to deduct travel expenses, including expenditures for meals and lodging, if the expenses are reasonable and necessary, incurred ‘while away from home’, and made in pursuit of a trade or business. Although the term ‘home’ (or ‘tax home’) in section 162(a)(2) normally means a taxpayer’s principal place of employment (and not the taxpayer’s personal residence), an exception to this rule arises when a taxpayer accepts employment away from his or her personal residence and the employment is temporary rather than indefinite. The purpose underlying this exception is to relieve the taxpayer of the burden of duplicate living expenses while at a temporary employment location, since it would be unreasonable to expect him to move his residence under such circumstances.” 2014 T. C. Sum. Op. 10, at p. 9 (Citations omitted).

See my blogpost “Home Is Where The Heart Is”, 7/21/11.

Temporary employment may cross the line and become indefinite employment “if it is expected to last for a substantial, indefinite, or indeterminate duration or due to changed circumstances or the passage of time.” 2014 T. C. Sum. Op. 10, at p. 10 (Citation omitted).

It’s time to march to Sir Eddie Elgar’s unwritten masterpiece, facts and circumstances. Well, Roj was temporary, as both the short term of his lease and the time he was engaged to work show, so he gets his lease rent, and some of his car mileage and meal expenses (using Fed standards for both), but loses out on his car log (concocted after the fact) and unsubstantiateds.

Still, if you’re temporary, make sure your employment terms, and your lease, summer or winter, “hath all too short a date”.

No, not R. C. Sherriff’s 1928 classic war play, but the end of the saga of Arthur I. Appleton, Jr., Petitioner, The Government of the United  States Virgin Islands, Intervenor,  Docket No. 7717-10,filed 1/31/14.

If you’ve forgotten this seemingly-unending tale of unguided Congressional largesse and confusing statutory enactments in support thereof, see my blogposts “Statute of Limitations? Maybe Not”, 12/28/10, “Missed It, But Better Late Than Never”, 8/24/11, “Somebody Does Read This Blog”, 12/4/11, “Farewell to the Virgin”, 5/22/13, and “The Never-Ending Story”, 6/3/13.

Both I and Judge Julian I. Jacobs, s/k/a His Honor Big Julie and hereinafter referred to as HHBJJIJ, have gotten a lot of mileage out of Artie’s four-year mission.

But it looks like it’s finally over. Artie gets summary judgment he owes no tax for three years at issue, but he won’t get his legal fees and admins. IRS is substantially justified.

HHBJJIJ: “A position is substantially justified if it is ‘justified in substance or in the main’-that is justified to a degree that could satisfy a reasonable person’ or has ‘a reasonable basis both in law and fact.’ Pierce v. Underwood, 487 U.S. 552, 565 (1988); Nicholson v. Commissioner, 60 F.3d 1020, 1025-1026 (3d Cir. 1995), rev’g T.C. Memo. 1994-280. Respondent’s position may be justified even if it is ultimately rejected by the Court. Estate of Wall v. Commissioner, 102 T.C. 391, 393 (1994) (quoting Wilfong v. United States, 991 F.2d 359, 364 (7th Cir. 1993)).

“The issue involved in this case was one of first impression. And generally, when an issue is one of first impression, respondent’s position is considered to be substantially justified if (1) respondent’s position is not contrary to any published decision, and (2) a ‘reasonable person [could not] say that it lacked colorable justification.’ Estate of Wall v. Commissioner, 102 T.C. at 394. However respondent’s position in a case involving an issue of first impression will not be considered substantially justified when that position conflicts with the ‘clear and unequivocal’ language of the statute. Nalle v. Commissioner, 55 F.3d 189, 193 (5th Cir. 1995), aff’g T.C. Memo. 1994-182. If respondent’s interpretation of a statute lacks ‘any ligaments of fact’ and is clearly erroneous as a matter of law, Portillo v. Commissioner, 988 F.2d 27, 29 (5th Cir. 1993) (quoting Portillo v.Commissioner, 932 F.2d 1128, 1133 (5th Cir. 1991)), rev’g T.C. Memo. 1992-99, or if none of the arguments offered by the Internal Revenue Service (IRS) during the various states of litigation has a chance of succeeding, Beaty v. United States, 937 F.2d 288, 292-293 (6th Cir. 1991), respondent’s interpretation is considered to violate the clear and unequivocal language of the statute and hence is not substantially justified. Newman v. Commissioner, T.C. Memo. 2012-74.” Order, at pp. 2-3.

The muddled state of the law got IRS confused. Pardonably, says HHBJJIJ.

“…(B)ecause of the complex interaction between the relevant Code sections and the applicable regulations, forms, and instructions, we found respondent [IRS] did not properly recognize that the Code and the regulations directed petitioner to file his income tax return with the VIBIR to fulfill his Federal income tax return filing obligations.

“We do not believe that a reasonable person would conclude that respondent’s position in this matter violated the ‘clear and unequivocal’ language of the statutes, or was clearly erroneous as a matter of law, or lacked colorable justification.” Order, at pp. 4-5.

Of course, finding “clear and unequivocal language” in the Code and Regulations is rather like finding the Philosopher’s Stone, but let’s pass that one.

Artie relies on a Field Service Advice, but that was (a) later trumped by a Chief Counsel Advice, and (b) “is not a document published for public use or issued to a particular taxpayer, rather it is an internal, nonprecedential document provided to employees for their guidance.” Order, at p. 5.

So colorable equals substantially justified.

And IRS, like its predecessor in the Temple, I tell you, went down justified (at least substantially justified).

That’s  Judge Gustafson. He’ll tell you what you meant to allege, but didn’t, and let the other parties know as well. Can’t do more than that.

On a day when the only T. C. Memo. was a thoroughly baseless claim for kiddie credits, and the designated hitters were mostly clean-ups of pre-Rand refundable kiddie credit deficiencies (see my blogpost “The Rebate Debate – Part Deux”, 11/18/13), it was time to survey the orders.

Every so often there’s a hidden gem. And Judge Gustafson has one, Tracey L. Pinson, Docket No. 12925-13, filed 1/30/14.

Tracey has petitioned for Section 6015 innocent spousiness. Darryl Dennis moves to intervene (late). IRS doesn’t care, and Tracey wouldn’t care, if Darryl would tell her why he’s intervening, what position he takes as to Tracey’s petition, and what he wants Judge Gustafson to do. Since trial isn’t for three months, if Darryl can tell Tracey timely, she can prepare for trial if Judge Gustafson lets Darryl in.

Now some judges would send Darryl back to the drawing board, and tell him to answer Tracey’s not-implausible requests.

But not Judge Gustafson.

He interprets the Notice of Intervention.

“However, the ‘Notice of Intervention’ that Intervenor lodged on January 13, 2014, states as follows:

“The grounds for the intervention and reasons why the intervenor Dennis disagrees with the Petition for Determination of Relief From Joint and Several Liability on a Joint Return served on the intervenor by respondent, are as follows:

“1.            Petitioner and intervenor are married and share the expenses for maintaining their household and supporting their daughter in Maryland.

“2.            Petitioner and intervenor separately filed income tax returns for the 2007 tax year.

“3.            At petitioner’s request, petitioner and intervenor jointly filed U.S. income tax returns on which they reported petitioner’s wage income and withheld taxes, intervenor’s business income and expenses, joint itemized deductions, and a joint tax liability for the tax years 2008, 2009, and 2010. * * *”

“Although the notice does not explicitly so state, it is clear that the outcome Intervenor seeks is that petitioner not be relieved of joint liability. Thus, Intervenor has already provided the information that petitioners seek.” Order, at p. 2.

Aside from pluralizing the (presumably) singular Tracey (does anybody proofread these orders?), Judge Gustafson goes the proverbial extra.

A truly obliging judge.

Some of us elderly types may remember a television program known as and by the name “Laugh-In”, s/k/a “Rowan & Martin’s Laugh-In”, which flourished some fortyfive years ago. On that show, there would sometimes be a segment entitled “Potpourri”, wherein would be enacted some very short scenes or sketches, or even one-line jokes.

Tax Court today featured but one T.C. Memo., involving a particularly threadbare attempt at a Section 104 exclusion; moreover, there were no designated orders denoted by the Judges of that august body. 

Thus, the humble blogger, in search of grist for the word processing software, was thrown back on the memory of that television show, so long ago.

First, Richard J. Davis & Betty Davis, Docket No. 22483-12, filed 1/29/14, wherein Judge Kerrigan states, in pertinent part, as the expensive lawyers say “respondent filed a motion for entry of decision stating that petitioners did not sing [sic] and return the decision documents.” Order, at p. 1. Song sung blue? 

Next, from a case I blogged more than once, but from which my old friend Charlie Baller, Esq.,  had long since been relieved as counsel, Christina A. Alphonso, Docket No. 17130-08, filed 1/29/14. See my blogposts “A New York Cooperative Conundrum”, 3/8/11, and “A New York Cooperative Conundrum – Part Deux”, 2/6/13.

Apparently new counsel had some trouble with Judge Chiechi’s vocabulary (or maybe their own).

“On January 27, 2014, the Court held a telephonic conference with the parties. During that conference call, petitioner’s counsel in effect advanced again their erroneous view that the word ‘filed’ can be substituted for the word ‘completed’ in the October 25, 2013 Order. The Court reminded petitioner’s counsel that the word ‘completed’ is different than the word ‘filed’ and that the word ‘filed’ is used throughout the October 25, 2013 Order, including twice in the same third ordered paragraph in which the word ‘completed’ is used. The Court informed petitioner’s counsel that the use of the two different words ‘completed’ and ‘filed’ in the very same third ordered paragraph of the October 25, 2013 Order should have alerted them that the word ‘completed’ had a different meaning than the word ‘filed’. The Court also advised petitioner’s counsel that they disregarded the portion of the third ordered paragraph of the October 25, 2013 Order starting with the words ‘taking into account’. Finally, the Court advised petitioner’s counsel that if they did not understand what the meaning of the word ‘completed’ is, they should have arranged a conference call with the Court and respondent’s counsel and/or contacted the General Counsel’s office of the Court for clarification.”  Order, at pp. 1-2.

Finally, following in the footsteps of Imagine Dragon’s third best-selling song of 2013, we have Scott Christopher Ryman, Docket No. 29107-13, filed 1/29/14, wherein Ch J Michael B. (“Iron Mike”) Thornton has IRS get all radioactive.

“ORDERED that, on or before February 19, 2014, respondent shall file a Supplement to the motion to dismiss setting forth whether the ordinary mailing time set forth in respondent’s motion takes into account irradiation of mail to the Tax Court.” Order, at p. 1.

Something new every day in Tax Court.

If not to your health, then to your wealth or your psychic well-being. Two cases in point from Tax Court today.

Leading off is (or maybe, are) Alvan L. Bobrow and Elisa S. Bobrow, 2014 T. C. Memo. 21, filed 1/28/14. Al is a lawyer specializing in taxation, as he tells Judge Nega several times, and that is his undoing.

Al and Elisa had several IRA accounts between them, and in the year at issue they were playing put-and-take, but claiming all the backs-and-forths were rollovers; rollovers, you remember, are the 60-day free kick a distributee gets to throw a distribution from one IRA into another. A trustee-to-trustee transfer is not a rollover, as distributee never puts paw to paydirt.

Al claims that he gets his once-a-year free kick for each IRA account. No, says Judge Nega, read Section 408(d)(3)(B). “The reference to ‘any amount described in subparagraph (A)(i)’ refers to any amount characterized as a nontaxable rollover contribution by virtue of that amount’s being repaid into a qualified plan within 60 days of distribution from an IRA or individual retirement annuity. The one-year limitation period begins on the date on which a taxpayer withdraws funds from an IRA or  individual retirement annuity and has no relation to the calendar year. Thus, for example, a taxpayer may not make a nontaxable rollover on December 31 in one calendar year and make another nontaxable rollover on January 1 in the next calendar year.” 2014 T. C. Memo. 21, at pp. 8-9.

“Any” means any.

Al ripostes with “… Tech. Adv. Mem. 9010007 (Dec. 14, 1989) and Zaklama v. Commissioner, T.C. Memo. 2012-346 for the position that a taxpayer’s use of funds between the time he takes a distribution from an IRA and the time he makes a repayment of the funds is irrelevant to determining whether the transaction qualifies as a rollover contribution. While we agree with petitioners that the use of funds is irrelevant where the funds include only money and no other distinguishable property, neither Tech. Adv. Mem. 9010007 nor Zaklama bears any relevance to petitioners’ argument that a taxpayer may make more than one tax-free rollover contribution per year.” 2014 T. C. Memo. 21, at pp. 9-10. (Footnote omitted, but read it; it says that Tech Adv. Mems. “…may not be used or cited as precedent and are afforded little weight in this Court.” 2014 T. C. Memo. 21, at p. 9, footnote 3).

Digging into legislative history, Judge Nega finds that the original 1974 version of ERISA limited rollovers to one every three years, but in 1978 Congress scaled that back to one per year. The concern was that there would be too much backing-and-filling, destabilizing the program (and letting taxpayers play games).

Al claims the trustee blew one of the transfers, so it came in a day late for the 60-day saver. But he has no evidence when he or Elisa ordered the transfer, or what the trustee did wrong. And they never applied for the Rev. Proc. 2003-16, 2003-1 C.B. 359 waiver, or tried to use the automatic waiver set forth therein.

Al and Elisa are looking at tax, penalty and interest. Big time.

Al seeks to deflect the penalty. But he has no substantial authority for his position, and didn’t disclose it on their return.

However, hope springs eternal. “Petitioner husband is an attorney specializing in tax law, a fact which petitioners state several times throughout their briefs as support for the position taken on their 2008 tax return. In support of their argument that section 6664(c) should negate any penalty assessed under section 6662(a), petitioners assert that petitioner husband ‘analyzed the transactions at issue in the light of the provisions of section 408(d)(3), and concluded that the three transactions should all be treated as nontaxable.’ It appears that petitioners would have us conclude that petitioner – husband’s career as a tax attorney is proof that they acted with reasonable cause and in good faith.” 2014 T. C. Memo. 21, at pp. 26-27.

I’m giving Al a Taishoff  “good try”, second class. Judge Nega, however, is much less generous.  Understatement 20% chop sustained.

Next up is (or are) Michael & Heather Lloyd, Docket No. 30691-12L, filed 1/28/14, but the order is only tangentially about Mike and Heather. Judge James S. (“Big Jim”) Halpern dealt with Mike and Heather last week, when he gave IRS summary judgment.

Mike’s and Heather’s lawyer, Louis Samuel, Esq., tried to put in answering papers at the time, but Judge Big Jim bounced them, because they weren’t e-filed.

See my blogpost “(Old) Technophobes, Rejoice”, 12/18/13.

Louis Samuel, Esq., re-files his paper papers as an appendage to two different motions with two different captions, apparently seeking indulgence from the e-filing requirements and trying to get his paper papers back in the record.

Too late, says Judge Big Jim, time for vacation. That is, a motion to vacate the earlier order. But that has to be filed electronically.

Louis Samuel, Esq., “…claims as good cause that he has been an attorney for almost 40 years and for the entire time has filed pleadings by paper. He further claims that, at the time this litigation started, he was not ready nor fully equipped to file papers electronically.” Order, at p. 2.

But unlike William J. (“Old Bill”) Wise, Esq., hero of my blogpost aforementioned, whose Tax Court career stretches back to 1959, and thereby earns Ch J “Iron Mike” Thornton’s exemption from e-filing (and he asked before his clients lost), Louis Samuel, Esq., is not one of the chosen few.

Judge Big Jim: “The mandatory aspect of our e-filing rule indicates our intent that counsel equip themselves to comply with the rule. There remains time for petitioners to move to vacate our order and decision. Counsel therefore has time to equip himself to comply with our e-filing requirements. We do not see good cause to exempt him from complying with those requirements.” Order, at p. 2.

So Louis Samuel, Esq.’s, papers go back to him yet again. And a copy of the order gets served directly upon his clients.

Judge Big Jim knows how to hurt a guy.

The IRS is getting epistolary, claiming their billets doux aren’t final determinations (and where have we heard that song before? See my blogpost “The Whistleblower Blows It”, 6/20/11), but Judge Cohen isn’t buying. So IRS finds Tax Court has jurisdiction to consider suspension of interest on deficiencies under Section 6404(g) by virtue of Section 6404(h).

And IRS can read the bad news in Charles M. Corbalis and Linda J. Corbalis, 142 T. C. 2, filed 1/27/14.

Charley and Linda claim the deficiencies relate to a loss carryback, and thus the year at issue is within the timeframe of the 1998 IRS Restructuring Act. IRS sent them four different Letter 3477s, saying no appeal and no judicial review. Charley and Linda petition anyway, sending in four lawyers, when IRS sends in one; inference arising therefrom: someone is in trouble.

IRS claims that Tax Court has jurisdiction to determine whether IRS wrongfully failed to abate interest, but not to suspend the accrual of interest.

Judge Cohen: “First, we agree with petitioners that all of section 6404 deals with abatement, of which suspension is a category. A claim that interest should have been suspended for a period is the logical equivalent of a claim for abatement of interest that has been assessed for that period.” 142 T. C. 2, at p. 15.

“The Court has stated, without limitation, that ‘section 6404(h) authorizes the Court to review for an abuse of discretion the Commissioner’s refusal to abate interest under section 6404.’ Urbano v. Commissioner, 122 T.C. 384, 390 (2004) (citing Woodral v. Commissioner, 112 T.C. 19, 22-23 (1999)). We see no persuasive reason why, as suggested by respondent, petitioners should have to seek recourse on their suspension of interest claim in another court. See Hinck v. United States, 550 U.S. 501, 506-508 (2007) (discussing congressional intent to provide exclusive jurisdiction to the Tax Court in interest abatement cases).” 142 T. C. 2, at p. 16.

Moreover, citing a statute whose title should resonate with Tax Court petitioners and practitioners everywhere, “We see no persuasive reason why interest suspension, when enacted in the RRA 1998, was to be treated separately from interest abatement for purposes of judicial review. When the interest suspension provision was adopted in 1998, the judicial review provision was redesignated by the RRA 1998 from section 6404(g) to section 6404(i); it was changed to section 6404(h) in 2002 by the Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107-134, sec. 112(d)(1), 115 Stat. at 2434. In each version of the statute, the provision for judicial review follows the types of determinations subject to review.” 142 T. C. 2, at p. 17.

While Section 7806(b) says that no inference, implication or presumption arises from the placement of any provision in the Code, Tax Court can consider the use of similar terms and provisions in aid of construction.

And here the statute uses “shall”, not “may”, so no discretion and thus judicial review. Anyway, there is a strong presumption in favor of judicial review of administrative acts.

How to do it: first check the statute to see if it makes the administrative determination (whether or not labeled as such) nonreviewable; then see if there are ascertainable standards against which to review the determination in issue; then see if any special agency expertise is involved, beyond the competence of the Court; finally, will review prevent the agency from carrying on its Congressional mandate. Here, the answers are no, yes, no and no.

Reviewable.

But there’s a question whether Charley and Linda ducked the $2 million barrier (see my blogpost “Net Worthlessness”, 1/17/14).

Charley and Linda put in affidavits, but IRS challenges these. IRS also claims Charley and Linda are not the “prevailing party”, but that is meaningless in this context. If they prevailed, no deficiency and no interest. Thus, the only Section 7430 test is net worthlessness.

“Respondent also contends that we should disregard the affidavits and net worth statements of petitioners as unreliable. Respondent acknowledges that in the case of a husband and wife, the net worth test is applied to each separately. See Hong v. Commissioner, 100 T.C. 88, 91 (1993). Respondent also ‘acknowledges that the current state of the law is to use acquisition cost, adjusted for depreciation, rather than fair market value to compute net worth.’ See Swanson v. Commissioner, 106 T.C. 76, 94-97 (1996). However, respondent asserts that fair market value is the better standard to use rather than acquisition cost, citing Powers v. Commissioner, 100 T.C. 457, 483-484 (1993) (accepting fair market values which had declined significantly from acquisition costs), aff’d in part, rev’d in part, 43 F.3d 172 (5th Cir. 1995), and section 301.7430-5(g)(1), Proposed Income Tax Regs., 74 Fed. Reg. 61589-01, 61595-61596 (Nov. 25, 2009). We decline to do so in a case in which the relevant facts have not been determined.” 142 T. C. 2, at p. 23.

So there can be an evidentiary hearing on Charley’s net worth and Linda’s net worth, and have a trial if needed. And though Charley and Linda may not have a slam dunk here, at least they stay on the court (pun intended).