The usual Section 7459(b) off-the-bencher rarely sees reconsideration. The last one I remember was six (count ’em, six) years ago: see my blogpost “Correction and a Rant,” 8/24/18. And that was a howler.

Today Judge Morrison grants reconsideration out of time (that is, past the 30-day cutoff of Rule 161) in Krishan K. Gossain & Kavita Gossain, Docket No. 21812-22, filed 5/29/24, and I wish he’d told us why, besides that both parties consented.

The off-the-bencher here was issued back in January; see my blogpost “Till Section 469(c)(7)(b) Does Us Part,” 1/16/24.

The opinion seemed clear enough, a 750-hour count for real estate pro status.

I’d like an example of what circumstances justify out-of-time reconsideration of an off-the-bencher, other than the kind of blunder described in my first-above-mentioned blogpost. Practitioners need all the guidance they can get.

Employee plan declaratory judgment cases are rare, so I won’t amplify STJ Jennifer E. (“Publius”) Siegel’s send-off to the trusty attorney for Solid Ground Transportation, Inc. & Solid Ground Transportation, Inc. Employee Stock Ownership and Profit-Sharing Plan, Docket No. 8843-23R, filed 5/28/24. I’ll call said trusty attorney JJ.

JJ sent in two (count ’em, two) petitions. IRS moves to toss the first for lack of jurisdiction, so STJ Publius stayed this one while she found jurisdiction, but bounced that one for duplication, stating that “both cases related to the same plan and period and were therefore duplicates,” Order, at p. 1. JJ asked for reconsideration, didn’t get it, and filed an appeal with 7 Cir. He doesn’t want a stay of this case while the appeal wends its way, rather wants to certify the lifting of the stay for appeal per Section 7482.

STJ Publius says no.

“The Court may certify an order for interlocutory appeal where it (1) involves a controlling question of law (2) about which there is a substantial ground for difference of opinion and (3) an immediate appeal from the order may materially advance the ultimate termination of the litigation.

“Petitioners fail to satisfy any of these requirements.” Order, at p. 2. (Citations omitted, but get them for your memo of law file).

First, wanting to have a stay is not a controlling question of law.

Next, JJ’s “assertion that the Tax Court’s ‘arriv[al] at a legal conclusion’ in the other case establishes the existence of substantial grounds for difference of opinion in this case only demonstrates petitioners’ misunderstanding. Generally, the ‘substantial ground for difference of opinion’ test is interpreted to involve questions that present serious and unsettled legal issues. There are no unsettled legal issues pertaining to the Order lifting the stay in this case. Petitioners suggest that the parties’ disagreement about jurisdiction in the other case satisfies this test. This suggestion, aside from being related to the wrong case, is incorrect.

“We note, too, that, under the circumstances presented, an interlocutory appeal of the Court’s …. Order lifting the stay would not materially advance the litigation. It would instead cause further delay: petitioners indicated in their most recent Status Report that they were unwilling to stipulate the certified administrative record while the appellate case is pending.” Order, at pp. 2-3.

Anyway, DJs are based on the administrative record, so JJ’s motion for discovery to supplement the administrative record is denied, as he’s not shown good cause therefor.

And STJ Publius already extended the time for filing the administrative record, so JJ’s motion to extend the time is moot.

Takeaway: As with most NOD cases, the time to build your record is at Exam and Appeals. The greatest number of NOD cases (CDP, DJ, IC-vs-EE, 501(c)(3), passport grabs, innocent spousery, oiffshore assets) were won or lost long before the petition hit the Glasshouse.

Today being what in my youth was called Decoration Day, but is now reconstituted as another three-day weekend, United States Tax Court is closed.

The original intent of this holiday being largely ignored, I will eschew further commentary beyond saying that some gave little, some gave much, and some gave all, but no one has the right to give nothing.

No, not music criticism; I didn’t see the Met’s Blanchard-Lemmons production. The title, though, and the verse of which it’s a part, state the matter well.

I’m tired of being silent. I’ve said before that I don’t, and won’t, traffic in conspiracy theories. And most mysteries properly belong on bookshelves or Kindles.

But the reason for the disappearance of ex-STJ Eunkyong (“N’Yawk”) Choi must be simple and obvious. It’s getting on for a year since her departure, but when I inquire no one knows anything. There was a suggestion in the trade press (Tax Notes), for which see my blogpost “Omertà at the Glasshouse?” 1/18/24. The Tax Notes item was simplicity itself. All it needed was an off-the-record statement confirming that an obvious blunder was hushed up to save her reputation. That would silence me without the need for anything more.

I have heard, from a source I deem reliable, that ex-STJ Choi is in Korea.

So let one who knows provide the simple, obvious answer, and put out the fire. Then I’ll stop asking.

I have not calculated, and have no present intention of calculating, the amount of scarce judicial resources wasted in preparing and serving such orders as Vyacheslav Senchenko & Lyudmila Senchenko, Docket No. 6901-24S, filed 5/24/24.

It’s the usual case, an unadmitted CPA with a Form 2848 acting as counsel. Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan sends him off with the usual boilerplate.

“The Tax Court, unlike the Internal Revenue Service, does not recognize powers of attorney. See Rules 24(a), 200; see also Ruggere v. Commissioner, 78 T.C. 979, 989 (1982). At this juncture and upon review of the entire record, the email address XXXCPA.com used to electronically file the petition will be disabled from the record in this case.” Order, at p. 1. (Name omitted).

At least Vy and Ly personally signed the petition, so they’re in.

But we get cases like this every day.

Taishoff says why not take the handout entitled “REPRESENTING A TAXPAYER BEFORE THE U.S. TAX COURT” Version 03/27/2022, and make it part of Form 2, the “simplified” petition?

And add to the Form 2 instructions a simple statement that Form 2848 or any State-sanctioned form of power of attorney DOES NOT entitle the representative or agent named in any thereof to represent petitioners in U. S. Tax Court. See Representing etc. for persons allowed to sign Tax Court petitions; no others need apply.

The stuff of this blog is controversy, specifically tax controversy. United States Tax Court is one great squared circle, where IRS and petitioners (and some bystanders, innocent or not) batter away at each other. The judges and STJs referee, as the Ch J disqualifies whichever petitioner fails to make weight.

Peering into this scrum are we of the blogosphere, the trade press, and solos, even such as I, a “general practitioner of very limited experience and mediocre qualifications.” Our quarry is the interesting, novel, offbeat beating-up or beating-down of one side or the other.

But so rare as to be unaccountable is a case like Deborah Gail Martin, Docket No. 7429-22, filed 5/23/24. Deborah has a Section 170 SNOD, but she isn’t a Dixieland Boondocker or a false façader. Deborah is a loyal congregant of “United House of Prayer for All People, a church described in section 170(c).” Transcript, at p. 4.

Judge Albert G. (“Scholar Al”) Lauber says she “has contributed extremely generously to the Church for many years, making gifts that represent a very substantial portion of her relatively modest income.” Idem, as my highly-experienced, highly-qualified, and expensive colleagues say.

Deborah has CWAs for better than $17K of the $36K she claimed on her 1040 for year at issue. Besides, she has bank statements for cash contributions less than $250 for another $600. The SNOD she got acknowledged $19K, but disallowed the rest. Apparently Deborah’s AGI was below the phase-out for Sched As.

Time for trial testimony.

“Petitioner originally believed that her bank records would show contributions to the Church for [year at issue] that were larger than this amount. However, when the case was called for trial… petitioner agreed that she had made some mistakes in calculating her deduction, and that her bank records did not in fact support a deduction larger than the IRS had allowed. She confirmed her agreement that the amount allowed by the IRS was correct and that she had no evidence to substantiate a larger deduction.” Transcript, at p. 7.

IRS never imposed chops.

Brings a smile to my wrinkled old face to see a Psalm 133:1 finish to a Tax Court off-the-bencher.

I love inventive taxpayers; they are the stuff that blogposts are made on. When the inventors are lawyers, it can get interesting. But when they are judges, it’s open season.

Jose Banuelos and Carol Ann Banuelos, T. C. Sum. Op. 7, filed 5/22/24, is Jose’s story. He is a retired annuitant, a pensioned ALJ (that’s Administrative Law Judge), the people who conduct fair hearings in disputes between people and administrative agencies, State, Federal, and local. They hear everything from Medicaid claims to traffic tickets. Jose works as a fill-in, taking the load from the still-unretired when the cases burgeon.

Jose gets a salary for his eight-hour day plus 3.3 hours for each opinion he writes. He also writes off $25K of unreimbursed business expenses against the $24K of salary and wages shown on his W-2.

STJ Zachary S. (“Highrise”) Fried says “Section 62(a)(2)(C) allows as a deduction from gross income in computing AGI ‘[t]he deductions allowed by section 162 which consist of expenses paid or incurred with respect to services performed by an official as an employee of a State or a political subdivision thereof in a position compensated in whole or in part on a fee basis.’” T. C. Sum. Op. 2024-7, at p. 3.

What means “fee basis”?

IRS says that means compensated by fees paid directly by the public, not paid into the fisc and redirected to the official. See my blogpost “Fee Simple – Not Absolute,” 2/9/16.

But Jose is inventive. The Fair Labor Standards Act “regulations provide that ‘[a]n employee will be considered to be paid on a “fee basis” within the meaning of these regulations if the employee is paid an agreed sum for a single job regardless of the time required for its completion.’ 29 C.F.R. § 541.605(a) (2019).” T. C. Sum. Op. 2024-7, at p. 7.

Unfortunately, AZ Judge Michael Jones lost that one, as more particularly bounded and described in the blogpost above set forth.

No direct payment, not “fee-based.”

Judge Cary Douglas Pugh has some bad news for Brett Stevan Jurries, teamed up with Sherise Julie Bruce, in T. C. Sum. Op, 2024-6, filed 5/22/24. Brett and Julie are splitsville, and Brett, a truck driver with a high school education, deferred to college educated ex Julie, who prepared their year at issue return.

Julie took unreimbursed business expenses on the truck Brett’s boss owned and paid all expenses. Brett applied for and got apportioned Section 6015(c) innocent spousery on some of Julie’s doings, but he claims he should get Section 6015(f) equity for the rest.

This brings in the Big Seven of Rev. Proc. 2013-34, § 4.01. IRS says Brett flunks Condition 2, because he got Section 6015(c) apportionment. No, says Judge Pugh, caselaw says you can still try for equity even if you got apportioned.

But Brett’s claim of fraud to get around Condition 7 fails. Brett says he never got a copy of the return for year at issue, but he had the passwords for the TurboTax return Julie filed, and she never stopped him from checking it out.

But he did check something, the share of the refund Julie gave him.

“Perhaps most damaging is the evidence in the record that Ms. Bruce deposited a portion of the refund from their 2016 joint return into Mr. Jurries’s checking account. Mr. Jurries testified at trial that he knew they could not deduct the expenses disallowed by the IRS because [his boss] owned the vehicle and paid its expenses. He received and kept part of the refund arising from the disallowed deduction. While the math might not work precisely, he has not explained how it would be equitable for him to keep all of the refund he received and leave Ms. Bruce to pay his share of the deficiency back. Nor did he suggest that he should bear the liability for the share of the refund he received attributable to the disallowed deduction.” T. C. Sum. Op. 2024-6, at pp. 6-7.

Brett took the refund, but trashed the equity.

Brett’s trusty attorney, whom I’ll call Bulldog Chris, brought two (count ’em, two) of Gonzaga U’s students along, to see what the Big Leagues, and real clients, are like. Good training.

Judge Ronald L. (“Ingenuity”) Buch answers the question I asked two-and-a-half years ago, with a big assist from SN Worthington Holdings LLC f.k.a. Jacobs West St. Clair Acquisition LLC, MM Worthington Inc., Tax Matters Partner, 162 T. C. 10, filed 5/22/24. The answer seems to be “muy affirmativo, good buddy,” as the Worthingtons opt out of TEFRTA to join the Bipartisan Budget Act crew in the single-shot régime. But IRS has to sink the opt-out, because IRS issued a FPAA, which is history if one elects to go BBA.

IRS claims the Worthingtons’ TMP didn’t sign the election, but folds that in its reply to the Worthingtons’ summary J motion.

IRS claims the Worthingtons don’t have enough assets to satisfy Reg Section 301.9100-22(b)(2)(ii)(E)(4). The Worthingtons say that all they need do is say so, that the Reg Section doesn’t require more.

Judge Buch: “… SN Worthington’s election satisfied the requirement that it represent that it had sufficient assets to satisfy an imputed underpayment. SN Worthington timely submitted a signed Form 7036, which included the following text: ‘This partnership . . . [h]as sufficient assets, and reasonably anticipates having sufficient assets, to pay the potential imputed underpayment that may be determined during the partnership examination.’ The form and the wording were designed by the Commissioner. By submitting a document with this specific text, SN Worthington complied with the plain text of Treasury Regulation § 301.9100-22(b)(2)(ii)(E)(4).” 162 T. C. 10, at pp. 10-11.

IRS argues that merely representing without proving adequacy frustrates the purpose of the statute. But the statute doesn’t state its purpose, and the partners are individually liable for any shortfall. Anyway, making a false statement on a tax return or document invokes Section 7206(1), which means three (count ’em, three) years hard and a $100K fine.

IRS says that the Worthingtons jerked them around with TEFRA type arguments while the SOL ran on year at issue, hence equitable estoppel. Yes, says Judge Buch, there was guilty silence, but no concealment of fact. IRS had the election form, and whether the Worthingtons had the assets is  irrelevant. IRS knew that the Worthingtons claimed the BBA, not TEFRA, but went ahead with a FPAA. Hence, FPAA invalid, no jurisdiction.

Wanna bet IRS amends the reg?

Nick and Vinny come out winners, as their option, split-the-sales-proceeds, and 1031, turn out winners, even as their percipient expert witness fails to slip her non-Rule-143-compliant report past Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan, in Parkway Gravel, Inc. & Subsidiaries, T. C. Memo. 2024-59, filed 5/21/24.

For the backstory, see my blogpost “Both Sides Now,” 11/1/22.

Even though Nick and Vinny are on both sides, both Parkway, a C Corp their fathers started, and V&N, their own partnership, followed the advice of my esteemed colleague Peter Reilly, CPA: if you set it up, follow it.

V&N took the laboring oar in rezoning and implementing. Their pre-existing option to buy Parkway’s gravel pit passed State law muster. They had multiple entities, but always kept them separate enough, billing and cross-billing when workers and materials were exchanged, and separating operations.

If IRS’ attempt to stick Parkway with the whole gain via sham transaction or assignment of income had been what Vinny and Nick intended, their tax posture would have been better, since the replacement property in the 1031 of Parkway’s share of the land sales proceeds  cost enough so V&N’s piece could have been deferred in the 1031 as well, and the mortgage interest for the replacement property would have been less.

Ch J TBS has a review of DE contract law, and a thorough discussion of sham transaction, both factual sham and legal (economic) sham. Factuals never happened as described; legals did, but didn’t move the economic needle. Nick’s and Vinny’s both happened as described, and did move the needle.

Being on both sides doesn’t wreck a well-documented, carefully-executed deal. A Taishoff “Good Job,” to Vinny’s and Nick’s advisors.