National Taxpayer Advocate Nina (“The Big O”) Olson has delivered her annual report. I did not devote a blogpost to the report, because it was much of a muchness with those of past years. See my blogpost “Come Sit Down Beside Me And Hear My Sad Story”, 1/13/12. Like Dewar’s Scotch, some things never change.

But now the overstretching and underfunding are reaching to Appeals, as witness two orders. First up, George H. Patton & Felomina F. Patton, Docket No. 16365-12 L, filed 1/24/14. George and Felomina were supposed to be remanded to Appeals for a supplemental hearing; Judge Laro said so, in an order filed 7/1/13, directing that the supp “shall take place at a reasonable and mutually agreed upon date and time, but no later than November 2, 2013.” Order, 7/1/13, at p. 1.

Judge Laro also scheduled dates for preparation and submission of a supplemental NOD, conference between the parties, and filing with Tax Court. And Judge Laro bowed out at that point.

None of the foregoing matters happened. So George and Felomina move for default and dismissal.

Ch J Michael B (“Iron Mike”) Thornton orders IRS to respond by Valentine’s Day. Wonder what the response will be.

Now this might seem an inconsequential bureaucratic slip-up, of the kind that happens all the time.

Except there’s another, and this time Ch J Iron Mike isn’t so gentle with IRS. This is Larry Eugene Alflen, Docket No. 3739-13L, filed 1/24/14.

Larry was remanded to Appeals to consider updated information for collection alternative as a result of a motion by IRS. Didn’t happen, “…due to ‘an administrative oversight on the part of’ respondent’s counsel.’” Order, at 1.

So IRS got more time from Tax Court, even though they never asked for more time.

IRS blew past date No. 2, and explained that their St Paul MN office was working on it, waiting for more information from Larry’s representative, but Larry was hospitalized.

However, the hearing was supposed to take place at the Denver, CO office, and nobody asked Tax Court for an order permitting them to move the location.

And the SO in St Paul, MN, needs another 45 days to finish up with the paperwork.

Ch J Iron Mike has had about enough. “The Court notes as an initial matter that the hearing was to be completed by December 23, 2013, not January 6, 2014. The Court further notes that the hearing was to take place with the Denver, Colorado Appeals Office. And finally, the Court notes that at no point did respondent [IRS] submit a motion for extension of time within which to conduct the hearing.” Order, at p. 2.

So he gives Appeals until 2/28, with no more delays absent an appropriate motion.

Justice delayed is…you know the rest.

 Or, Here We Go Again

 A rather cryptic order from Ch J Michael B. (“Iron Mike”) Thornton sending Gerdau Macsteel, Incorporated, and Related Subsidiaries, Docket No. 12642-01, filed 1/23/14, back to Judge Marvel “for purposes of conducting any further proceedings pursuant to the just-referenced appellate mandate.” Order, at p. 1.

What “appellate mandate”, you may ask? Nothing in the trade press or blogosphere about a mandate from the Fifth Circuit issued 1/10/14.

And why, do you ask, am I blogging about this case yet again? See my blogpost “Macsteal”, 8/30/12, wherein I breezed through 214 pages of Judge Marvel’s prose anent the misdoings of Deloitte and Gerdau Macsteel etc.

I was perplexed by this “mandate”. I put in a call to lead counsel for the taxpayer, and if it is ever returned (and if I am given permission to disclose), I will provide such enlightenment as I may.

For the time being, however, it would seem that all Judge Marvel’s lucubrations, analyses and deconstructions have gone for naught.

Here’s the scoop from PACER for Fifth Circuit:

“COURT ORDER granting joint stipulation of the parties to dismiss the cross appeal pursuant to Fed. R. App. P. 42, filed by Appellant Cross-Appellee CIR and Appellee Cross-Appellant Gerdau Macsteel, Incorporated and Affiliated Subsidiaries [7535212-2]; FURTHER granting the joint stipulation of the parties to vacate the decision of the Tax Court and remand the case, filed by Appellant Cross-Appellee CIR and Appellee Cross-Appellant Gerdau Macsteel, Incorporated and Affiliated Subsidiaries [7535207-2]. Judge: CDK, Judge: WED, Judge: JWE. [13-60132] (DLJ).”

Vacate the decision and remand the case? Here we go again.

See my blogpost “The Fix Isn’t In”, 3/11/13. One way to make alimony not to be includible gross income to the payee is to have the divorce decree or separation agreement fix (in terms of an amount of money or a part of the payment) as a sum which is payable for the support or children of the payor spouse. That’s straight out of Section 71(c)(1), and it’s what saved Brendon James DeLong in my blogpost abovecited.

And it torpedoes Wendy P. Trebat F.K.A. Wendy P. Pellegrini, in an off-the-bench opinion from Judge Kerrigan, Docket No. 28736-12S, filed 1/23/14.

Although this is a small-claimer and can’t be cited, the reasoning may be useful to the practitioner.

When Wendy cut the tie that bound her to Edward, the Marital Settlement provided Edward would pay Wendy “‘unallocated maintenance’ of $4,500 per month, which would be reduced to $2,250…, and would cease [on a date certain]…. These payments would cease upon the death or remarriage of petitioner or upon petitioner’s cohabitation with another person. The Marital Settlement Agreement further stated: ‘The sums paid by Edward to [petitioner] pursuant to this paragraph *** are acknowledged to be paid incident to Edward’s legal obligation to support Wendy. Said sums shall be includable in the gross income of Wendy and deductible from the gross income of Edward for the purpose of federal *** taxation within the meaning and intendment of Sections 71 and 215 of the 20 United States Internal Revenue Code’.” Order, at p. 5.

Edward’s attorney was on the ball, but about a year later, the deal was modified. The original deal was “set aside and held for naught”. Order, at pp. 5-6. The new deal was a straight unallocated $4,500 per month for seven years, no phaseouts and no fixing, and no word about tax consequences or incidents.

Wendy went to a preparer recommended to her, who worked for “a national firm”, Order, at p. 6. No word about the preparer’s qualifications, whether Wendy told the preparer the whole story, and whether Wendy thought the whole thing was too good to be true. In any case, she reported none of the cash Edward gave her in either of the two years at issue.

IRS hits Wendy with a SNOD, claiming the 20% accuracy hit for both years, but concedes one of them.

Wendy claims it was all child support (she and Edward had two little Pellegrinis). But the cutoff of payments isn’t related to either child coming of age, leaving school or anything else. And the payments remained unallocated.

Judge Kerrigan slides over the termination-at-death provision of Section 71(a), but Edward’s deduction isn’t at issue. Whether or not Edward gets the deduction, it’s still gross income to Wendy.

No fix, no exclusion.

But Wendy’s paid preparer rescues her from the second of the 20% chops IRS wants to give her. “Petitioner contends that the payments were for support of her minor children. She did not believe the payments were alimony; and she believed that the payments were related to her children graduating from high school. Petitioner hired a tax preparer who had a good reputation in the community. Petitioner had reasonable cause and acted in good faith. We hold that petitioner is not liable for the accuracy-related penalty….” Order, at p. 11.

Compare and contrast Judge Kerrigan giving Wendy a bye with STJ Daniel A. (“Yuda”) Guy laying a blast on Mark Anthony Rael, who likewise used a preparer from a national firm, but got the chop. See my blogpost “It Depends”, 10/22/13.

We’ve all heard the oft-quoted statement ascribed to the great mathematician: “Insanity is doing the same thing over and over again and expecting different results.”

Proofs of this are commonplace, and STJ Daniel A. (“Yuda”) Guy has a designated hitter to reinforce the point. This is the story of Andrew Leyva, Docket No. 3223-13, filed 1/23/14.

Andy is a frivolity merchant who has made the trip to Tax Court before now, getting a $5k Section 6673 zing back in December, 2010. It seems he’s a disciple of Scott F. Wnuck, as to whom see my blogpost “One’ll Get You Five”, 5/31/11.

For a look at Andy’s previous joust with Tax Court, see Judge Marvel’s off-the-bencher in Docket No. 25427-09, filed 12/10/10. And Ninth Circuit affirmed on a “not for nuthin’” basis.

But not a bit abashed, Andy’s at it again. It’s another all-zeros 1040 with an “I’m not taxable” argument that bites the dust just like his last venture.

STJ Yuda: “Petitioner failed to allege any facts in his petition or reply to respondent’s [IRS’] motion contradicting the essential allegations in respondent’s motion or identifying a genuine dispute as to a material fact. Petitioner simply makes vague arguments that he is not required to pay income taxes on his wages and other earnings, and is not liable for an accuracy-related penalty. Simply put, petitioner’s arguments are frivolous and groundless. Under the circumstances, we see no need to catalog petitioner’s arguments and painstakingly address them. As the Court of Appeals for the Fifth Circuit has remarked: ‘We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.’ Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984).” Order, at p. 2.

STJ Yuda also notes Andy’s past performance, which earned him the $5K zing from Judge Marvel and affirmance thereof by Ninth Circuit: “We note that petitioner is no stranger to the Court. Notwithstanding the imposition of a penalty under section 6673 at docket No. 25427-09, petitioner has persisted in making frivolous arguments to this Court in this case. We can only conclude that petitioner instituted these proceedings primarily for the purpose of delay. Under the circumstances, we conclude that a section 6673 penalty of $15,000 is well warranted here.” Order, at p. 3. (Footnote omitted; it’s a brief account of Andy’s previous frivolity).

So if one’ll get you five, five will get you fifteen.

Wanna bet that Andy petitions from the NFTL or Notice of Levy?

That oft-repeated parental admonition comes from Ch J Michael B. (“Iron Mike”) Thornton, addressed to Sarah A. Cornish, in Docket No. 13387-13 L, filed 1/22/14, a day when Tax Court is either snowed in or snowed under, as there are no opinions and only one designated hitter, which I find need not long detain the reader.

 Sarah and husband Cornell D.M.J. Cornish get a SNOD, and Cornell D. M. J. timely petitions under a different docket number. Sarah amends to add herself to Cornell D. M. J.’s petition; so far, so good.

But simultaneously therewith, as the white snowboot lawyers hereabouts say, Sarah files a petition seeking review of a NOD for collection, attaching a CP22E letter. For a quick-and-dirty overview of the CP22E letter, see http://www.irs.gov/Individuals/Understanding-your-CP22E-Notice.

Of course, the IRS website and its simplistic explanations are no substitutes for the law and regulations, but it might help point the way forward.

And of course, a CP22E is not a NOD, but Sarah isn’t finished.

IRS moves to dismiss for lack of jurisdiction as to the non-existent NOD, and supplements same; to the extent Sarah raises objections to the SNOD, that’s covered by the earlier petition Cornell D. M. J. filed, and she signed onto, so this petition is duplicative. One size fits that one.

Ch J Iron Mike: “Respondent [IRS] states in the Supplement that on the basis of diligent search conducted of respondent’s records, respondent has determined that petitioner has not filed a claim for relief from joint and several liability for [the year at issue] and respondent has not issued petitioner a final determination under section 6015, I.R.C.

“…petitioner lodged a Motion To Strike Motion To Dismiss. The Motion To Strike Motion To Dismiss is in the nature of an objection to respondent’s motion, and the Court recharacterized it as such. …petitioner filed a Reply to Respondent’s Supplement.” Order, at p. 2.

Now for the limited-jurisdiction litany, straight from the word processor. Tax Court has limited jurisdiction, can’t exceed it. In collection cases, there must be a NOD and a timely petition, absent either of which, Tax Court, paraphrasing the immortal words of  Mick Jagger’s and Keith Richards’ 1965 hit, “can’t get no…jurisdiction.”

And the same goes for innocent spousiness, in case Sarah wants to walk that walk. However, there’s a byway. “In the alternative, a taxpayer may invoke the Court’s jurisdiction under section 6015, I.R.C., if the Commissioner fails to issue a final notice of determination within 6 months after the taxpayer has filed an election for relief from joint and several liability. I.R.C. sec. 6015(e)(1)(A)(i)(II).” Order, at p. 2.

And see my blogposts “Whoso Would Intervene, Though He Were Dead”, 8/2/13, and “Whoso Would Intervene – Part Deux”, 8/5/13.

Sarah claims she did ask for innocent spousiness. Ch J Iron Mike doesn’t like the way she asked, and neither does the regulation. In fact, Ch J Iron Mike is so peeved he confuses the gender of the petitioner.

“In his [sic] Reply to Respondent’s Supplement, petitioner contends that she in fact requested relief under section 6015, I.R.C. She points to her phone records and contends that she requested relief by calling respondent’s phone numbers and writing a letter to the ‘Director of the I.R.S.’ as well as during discussions with respondent’s employees.

“Section 1.6015-5, Income Treas. Regs., provides that to request relief, the requesting spouse must file a Form 8857, Request for Innocent Spouse Relief, submit a written statement containing the same information required on the Form 8857, or submit information in the manner prescribed by the Treasury and I.R.S. in forms. The Instructions for the Form 8857 further detail how such relief should be requested. They provide the address for mailing the request and fax numbers. Petitioner did not request relief in the manner specified in the Instructions for Form 8857.” Order, at p. 3.

Anyone wanna bet Sarah wouldn’t have known Form 8857 or its pendant instructions from the label on a can of soup?

So, no NOD, no judicially-cognizable innocent spouse request, and the SNOD is already sub judice.

Sarah is out.

But Tax Court is closed today, 1/21/14, a situation unreferenced in Sammy Cahn and Jule Styne’s 1945 all-time favorite. Here’s the sum and substance:

Snow & Dismissal Procedures – Washington, DC, Area:

Applies to: January 21, 2014

Status: Federal Offices are Closed – Emergency and Telework-ready Employees Must Follow Their Agency’s Policies.

FEDERAL OFFICES in the Washington, DC, area are CLOSED. Emergency and telework-ready employees required to work must follow their agency’s policies, including written telework agreements.

See my blogpost “Net Worthiness”, 1/10/14, for a quick refresher on Section 7430(c)(4)(A)(ii), which in turn incorporates the requirements of 28 USC §2412(d)(2)(B); and 28 USC§2412(d)(2)(B) describes an individual whose net worth did not exceed $2,000,000 at the time the civil action was filed.

Clear? Thought not.

And our search for truth and justice today involves not our old friend Section 7430, with its largesse for those who prevailed over IRS, but rather the right of a taxpayer, pursuant to Section 6404(h) to contest IRS’ failure to abate interest as an abuse of discretion.

You see, to be able to mount a Section 6404(h) attack, you have to show a net worth less than $2 million.

Now abatement of interest is itself a study. See my blogposts “Abuse Means Abate”, 2/3/12, “A Case of Interest”, 8/9/12, and “An Interest(ing) Question – Or Two”, 6/11/13.

But Maryann Larkin & Thomas Larkin, Docket No. 13515-11, filed 1/17/14, might actually have a valid Section 6404(h) claim, if they can limbo under the $2 million.

Remember our friend Karen Q. Pierce, from my blogpost “Net Worthiness” abovecited, who missed the cutoff, and was thrown out by Ch J Michael B. (“Iron Mike”) Thornton?

Well, Maryann and Tom got Judge David Gustafson, who authors this designated hitter. But neither they nor IRS can show that Maryann and Tom are on the impoverished side of $2 million.

Maryann and Tom move for summary judgment (final, not partial), making the unsupported statement that their net worthlessness is below the mark.

IRS counters: “Despite their assertions in the petition, Petitioners provided no evidence to prove they comply with the net worth requirements set forth in section 7430(c) (4) (A) (ii). Two parcels of property owned by Petitioners – a home in Palm Beach Gardens, Florida and a condominium in Aspen, Colorado – have values asserted by county property appraisers totaling almost $1.9 million ($714,399.00 for the Palm Beach Gardens property and $1,185,400.00 for the Aspen condominium). The extent of Petitioners’ total assets is unknown.” Order, at p. 2.

OK, so $1.9 million is still less than $2 million.

And what “county property appraisers” (I presume IRS means local tax assessors) and their assessments of value have to do with the matter is at best obscure, and at worst irrelevant. See my blogpost “Quanto? Il Prezzo”, 7/24/12, when Judge Ruwe gives the local tax bill and the tax billers the right-about-face.

And in the case I blogged in “Quanto”,  the taxpayers actually produced the bills, where here IRS has nothing but the bare assertion. And even if the properties were so assessed, and that assessment was the actual free-and-clear FMV, no evidence has been offered to show what liens or encumbrances exist on the properties. There’s plenty of real estate with big AVs that’s subacqueous, as the high-priced lawyers would say.

While IRS doesn’t know Maryann’s and Tom’s total assets, neither do they know their total liabilities.

And Maryann and Tom ain’t tellin’–so far, anyway.

So Judge Gustafson sends Maryann and Tom back to set forth in detail their assets and liabilities. Of course, they can always stipulate with IRS.

Yeah, roger that, as we used to say.

Or Perhaps, “Enough – Part Deux”

My long-suffering readers are doubtless past the stage of surfeit with tales of the obliging character of That Obliging Jurist Judge David Gustafson. I will not cite the numerous blogposts wherein I have extolled his assistance to voyagers adrift among, or aground upon, the shoals of Tax Court.

But has Judge Gustafson finally reached the limit even of his endurance? It would seem so.

Case in point: Vishwa P. & Savitry Srivastava, Docket No. 3400-08 L, filed 1/16/14.

I’ll let Judge Gustafson speak for himself.

“After hours on January 15, 2014, petitioners transmitted to chambers a 40-page telefacsimile. It appears to be a series of letters between the parties. The first page states that it is sent to chambers ‘to enable the Court to understand the PETITIONERS’ VIEWPOINT AND/OR REQUEST.’ The Court is not reading the document further nor attempting to understand it.” Order, at p. 1.

I wouldn’t either, Judge. Ex parte communications to the Court are off the table to begin with. But Vish and Savi don’t know that.

So Judge Gustafson, with what slight oblige he can muster, gives Vish and Savi a hint.

“Petitioners shall not transmit to the Court copies of their correspondence with respondent and, in particular, shall not disclose to the Court any proposed terms communicated in settlement negotiations. If petitioners wish the Court to know their viewpoint, then they shall properly file with the Court and serve on respondent a memorandum or status report. If petitioners wish the Court to entertain a request, then they shall file with the Court and serve on the IRS a proper motion. See Rule 50(a).” Order, at p. 1.

Oh yes, and Judge Gustafson on no fewer than three (count ‘em, three) prior occasions warned Vish and Savi not to tell him about settlement discussions.

No, not my unfortunate conflation of Charles Lamb with Sammy Fain and Irving Kahal, nor yet another old client surfacing from the silt-stirred waters of Tax Court (see my blogpost “All Those Old, Familiar Faces”, 1/19/12), but rather the release from durance vile in ice-cold Marcy, NY (and no, I don’t know where that is either) of one who bears a name from the past.

From out of the pages of yesteryear comes an Order from The Judge Who Writes Like a Human Being, a/k/a The Great Dissenter, Mark V. Holmes, entitled L. Dennis Kozlowski, Docket No. 3498-10, filed 1/16/14.

Remember L. Dennis? No? How fleeting is fame. While I never met L. Dennis personally, I well remember closing the sale of the Fifth Avenue duplex wherein were cached the famous $8000 shower curtain and the $2000 wastebasket, and he wasn’t even a government contractor. The law firm with which I was then associated represented the cooperative housing corp that owned the building, and we were far from lonely at that closing, as the DA, the State and Federal taxing authorities were gathered round like a kickoff return squad over a football downed at their adversary’s two-inch line.

And for $20 million bucks or thereabouts, it was quite a show, just about nine years ago today.

Well, Judge Holmes was going to try L. Dennis’ case in Buffalo, NY right before Thanksgiving, except L. Dennis was still a guest of myself and the other People of the State of New York.

Now that L. Dennis has served his eight-and-change, he and IRS think maybe they can make peace at Appeals. As we know, Judge Holmes is enamored of Appeals, and will send IRS and taxpayers there every chance he gets.

So just let Judge Holmes know around Valentine’s Day how that’s workin’ out for ya, L. Dennis.

And here’s another character, newer but still irrepressible. It’s John Ryskamp, he of Docket No. 13681-11L, filed 1/16/14, the man who has proven beyond a reasonable doubt that flattery will get him nowhere. See my blogpost “Enough”, 1/8/14.

Back already, John? You know he is. And Judge Holmes has him again.

This time, barely a week after Judge Holmes booted him into touch, “Petitioner quickly moved for orders

“vacating that decision;

“that the Appeals Office answer each and every argument in

the Request and that assessment and collection be enjoined

pending further order of the Court;”

“that his case be reassigned to another judge; and

”enjoining the ‘collection of any individual State or Federal

income taxes, Social Security taxes, Medicare, State

unemployment taxes or student loans . . . pending further

order of the Court or any sums levied on individual income.” Order, at p. 1.

But that’s not all, folks: “He included in his package a supplement to his previous ‘petition’ to the Court of Appeals to the Federal Circuit that seemed to be in the nature of a motion to that Court, but which he apparently filed only in Tax Court.” Order, at p. 2.

I guess John’s view is one court is much like another.

Anyway, “This case was closed with the entry of the order granting respondent’s motion for summary judgment, so all the motions other than the one seeking to vacate the decision are untimely. In considering petitioner’s motion to vacate decision the Court looks to Federal Rule of Civil Procedure 60. See, e.g., Etter v. Commissioner, 61 TCM 1772, 1773 (1991). FRCP Rule 60(b) is the rule that’s applicable here, but it requires some showing of ‘mistake, inadvertence, surprise, or excusable neglect;’ or ‘newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial.’ Order, at p. 2.

See my above cited blogpost for the grant of summary judgment finally bouncing John after his trip to Appeals failed.

And as for compliance with FRCP 60, “Petitioner here meets neither of these standards. It is unlikely that the Court will allow further motions from petitioner in this now-closed case. He is advised to file a notice of appeal if he wishes additional judicial review.” Order, at p. 2.

John, go play somewhere else. Judge Holmes wants to spread the joy.

This is not a post about tax. It’s about something more important. A Federal Appeals Court has struck down FCC’s rule on net neutrality. Net neutrality means every ISP has to send along traffic at the same rate: it can’t speed up its friends and slow down whomever it doesn’t like.

Now I’ve said before this is not a political blog. But this post is off-topic for a reason: the Internet is the poor peoples’ press. This is how one person can take on the corporate Goliaths and the malefactors of great wealth.

If Verizon (of which I am a subscriber and through which this blogpost will go), can effectively shut me down by slowing my transmissions, should I have the temerity to say anything that offends some unretired vice-president or his/her political bedfellows, or even the government of the United States of America, then I am through.

And so is the freedom of the press and freedom of speech.

The late Frederick W. Friendly, an exemplar of broadcast journalistic integrity, once asked what would happen were there only three great printing presses in the country: would free speech and a free press survive?

His answer was to promote independent television networks, and the product was the Public Broadcasting Corporation, which survives despite the efforts to stifle it.

Now we have the internet, the greatest tool for free speech and a free press since the invention of writing.

No corporation, no individual, no one, repeat no one, has the right to suppress it.

Here’s the petition to the FCC to write a rule that will survive. I’ve signed it. You please sign it.

Verizon struck the final blow against Net Neutrality when a federal appeals court ruled in its favor and struck down the Federal Communications Commission’s Open Internet Order. The FCC must take action now to stop the corporate takeover of the internet.

http://act.credoaction.com/sign/verizon_netneutrality?referring_akid=a137138901.6408043.0l-k-d&source=conf_email