“Thou are a rare noodle, Master. Do what was done last time is thy rule, eh?” G.B. Shaw, Saint Joan, Scene VI

I’ve used that quotation before to call into question some hidebound adherence to precedent, but CSTJ Lewis (“A Rare Name”) Carluzzo shows that such adherence can serve the adherent well.

Justin M. Maderia, T. C. Sum. Op. 2024-5, filed 5/8/24, comes up light on the proof side when IRS claims he got $192K in constructive dividends from the lobster brokerage corporation, 50% of whose stock he owned.

As the case is a small-claimer, one expects something less than top-of-the-line lawyering, but CSTJ Lew is beyond unimpressed with both sides here.

“Few facts have been stipulated. The First Stipulation of Facts and the First Supplemental Stipulation of Facts consist almost entirely of documents. Many of those documents, apparently intended by the parties to ‘speak for themselves,’ have little to say. Other than the Stipulations of Facts no evidence was offered by either party. No witnesses were called at trial, and no other documents were offered into evidence. Nevertheless, in opening statements and closing arguments, counsel for the parties relied upon facts not in evidence to support their respective positions. Those ‘facts’ are ignored in this Opinion.

“At trial respondent objected to the admission of stipulated Exhibits 9-P, 10-P, and 11-P. According to respondent, the information in the documents is not relevant. Ruling on respondent’s objection was reserved at trial. After consideration of what little evidence we have, we find that the information in those Exhibits is probative to the imposition of the section 6662(a) accuracy-related penalty here in dispute. That being so, respondent’s objections are overruled, and the documents will be received into evidence.” T. C. Sum. Op. 2024-5, at p. 2, footnote 2.

Justin’s trusty attorney, whom I’ll call Gene, may have saved himself and his client with those disputed exhibits. As IRS deployed two (count ’em, two) attorneys here, SMH, as they say on their smartphones.

The lobster brokerage’s 1120 doesn’t show how any expense stated therein relates to the alleged deficiency, nor does Justin’s 1040 show any payments from lobster brokerage other than salary and wages. Nor does it (or the attorneys) talk about E&P. The SNOD does, it is presumed correct, and Justin doesn’t contest any expense item, nor deny that lobster brokerage had E&P.

His trusty attorney’s arguments about Exam miscues get run over by Greenberg’s Express. But Justin does claim that he was audited in prior years, and whatever he got in those years from the lobster brokerage settled out at Exam, so all he did in year at issue is what he always did before. I infer that this was the stuff of the disputed exhibits, in which case Gene gets a Taishoff “Good Job, third class.”

“Considering petitioner’s apparent consistent course of conduct with respect to positions taken on his federal income tax returns over a period of years and the results of the examinations of some for prior years, we find that petitioner acted reasonably and in good faith with respect to the underpayment of tax for [year at issue]. That being so, he is not liable for a section 6662(a) penalty for that year.” T. C. Sum. Op. 2024-5, at p. 5.

It’s been nine (count ’em, nine) years since I saw a serial bankruptcy filer show up in Tax Court. The previous case is to be found in my archive, wherein lies my blogpost “A True Rounder,” 4/20/15. But now Lisa M. Holley, T. C. Memo. 2024-54, filed 5/8/24, takes up the tactic.

I’ll let Judge Albert G. (“Scholar Al”) Lauber take up the tale.

“Upon review of publicly accessible court records, the SO ascertained that petitioner had filed for bankruptcy four times between 2016 and 2020. Each case was dismissed by the court, which determined that petitioner was seeking to delay collection efforts by the IRS and by United Healthcare, a judgment creditor. In her case activity record the SO noted the determinations by the bankruptcy court that petitioner had filed for bankruptcy in bad faith, had submitted false and misleading documents to the court, had made unauthorized payments during the bankruptcy case, and had engaged in efforts to hide income and assets.” T. C. Memo. 2024-54, at p. 3.

Lisa owed about $2 million in tax. The SO bounced her CDP for want of current compliance with estimateds. Read the opinion for more.

Turns out that when the SO told Lisa’s representative that Collections reckoned that Lisa could sell off some of her assets and do a PPIA, “(P)etitioner’s representative withdrew later that day. (The SO noted in her case activity record that ‘TP changes POAs frequently.’) Petitioner’s new representative contacted the SO…and reiterated petitioner’s desire for an IA. But the representative made no specific offer in terms of monthly payments or payment period.” T. C. Memo. 2024-54, at p. 4.

You can see where this is going.

The Section 6213(a) automatic stay, an analog to Bankruptcy’s11USC§362, gives support to the Hallmark Collective argument in deficiency cases.

Charles Dickens’ creation, to which I’ve referred before now, may be a misnomer. The word “circumlocution” means talking around, using a lot of words to avoid making an exact statement. Dickens’ creation did that, but also concocted spurious legislation, which purported to solve a problem, but left matters just as they were before.

Today we have a fine example of many words talking around the point.

Shielder Evondra Pressley, Docket No. 9471-22L, filed 5/8/24, petitioned something, possibly a NOD, judging from the “L” suffix. Shielder is pro se, hence her petition may be slightly less than perfect. IRS deploys three (count ’em, three) attorneys, all presumably adroit at drafting pleadings. Their efforts are not much better.

It falls to Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan to unscramble this frittata.

IRS moves for judgment on the pleadings.

“Given the relief sought in the Motion, that is dismissal, and the ground for that relief, that is that the Petition was not filed within the period of limitations prescribed by I.R.C. section 6330(d)(1), respondent’s Motion will be recharacterized and treated as a motion to dismiss for failure to state a claim upon which relief can be granted.” Order, at p. 1.

Of course, obeisance to Boechler, P. C., must be paid.

“Respondent’s Motion relies upon the undisputed facts in the record that show that the Petition was not filed within the period of limitations prescribed in I.R.C. section 6330(d)(1). Petitioner has not claimed, much less established, that equitable tolling extended that period to the date that the Petition was filed.” Order, at p.1.

One must ask what happened to the good, old-fashioned motion to dismiss for want of jurisdiction. Not to mention how a pro se like Shielder would know to plead equitable tolling.

The immortal words of Lt. Col. John McCrae, the Voice of Flanders’ Fields, echo today, as that patient and obliging jurist, Judge David Gustafson, confronts one whom Taishoff deems the successor to the late Fighting Joe Insinga.

That worthy successor, assisted by his zealous, trusty attorney (whom I’ll call Mike), is Arthur M. Bialer, Docket No. 6983-19W, filed 5/7/24.

For Fighting Joe’s farewell, see my blogpost “Taps for Fighting Joe,” 12/5/23.

Art has only furnished me with four (count ’em, four) blogposts to date, as against the late Fighting Joe’s 18 (count ’em, 18, and I have). But it’s early times yet, as Tax Court litigation goes; Art and Mike are clearly aboard for the long haul.

I won’t try to paraphrase or summarize Judge Gustafson’s latest attempt to do a Bletchley Park on a couple Art’s motions (hi, Judge Holmes).

This is such stuff as bloggers’ dreams are made on.

Yes, it’s another case of pushing the law to the limits, but it fails because of what was (or was not) within the envelope mailed by Milton Thomas Roberts, Docket No. 7011-22, filed 5/6/24. Milton Thomas was late with two (count ’em, two) years’ returns. IRS admits it got one of them. Milton Thomas claims he mailed both 1040s in the same envelope, and proffers PS Form 3800, U.S. Postal Service Certified Mail Receipt, claiming same is prima facie proof he mailed both.

Judge Courtney D. (“CD”) Jones says no, Section 7502 doesn’t save Milton Thomas.

“… section 7502 is inapplicable in this case. In the Petition, Mr. Roberts concedes that he did not timely file his return for taxable [year at issue]. Therefore, Mr. Roberts’s return for taxable [year at issue] would only be filed upon receipt of that return by the IRS, and the certified mailing receipt postmarked after the due date for filing the return is not prima facie evidence of the filing of the return. Estate of Wood, 92 T.C. at 796; see also §7502(c)(2). Nonetheless, Mr. Roberts asserts that he has provided evidence that he mailed his returns for [both] taxable years… in the form of a certified mail receipt. But Mr. Roberts did not include any return receipt as direct proof of actual delivery. Despite this fact, respondent acknowledges that he received Mr. Roberts’s return for [other] taxable year… which was purportedly sent at the same time as Mr. Roberts’s [year at issue] tax return. Nevertheless, Mr. Roberts has not set forth any evidence that the… package contained his return for taxable [year at issue]. Therefore, a genuine dispute remains regarding the issue of whether Mr. Roberts mailed—and respondent received—Mr. Roberts’s return for taxable [year at issue] at the same time it received his return for [other] taxable year…. Accordingly, we will deny Mr. Robert’s [sic] Motion for Summary Judgment.” Order, at p. 4.

Why does it matter? Because IRS denied Milton Thomas his alimony deduction for year at issue. Milton Thomas claims the SNOD resulting therefrom is too late per Section 6501, as what he filed was outside 3SOL; IRS says he never filed for year at issue, hence no SOL, although other year is out.

So the outcome must abide the trial.

Takeaway- If you’re past due date, even mailing Certified RRR won’t help you. IRS can still claim what you mailed wasn’t the magic paper. E-filing has its benefits.

No, not that phone call, the one that is every practitioner’s nightmare; I described it in my blogpost “The Phone Call,” 4/15/14.

This is Judge Goeke laying out the parameters for IRS telephonic testimony in the long-running saga of Scott A. Blum & Audrey R. Blum, Docket No. 5313-16, filed 5/6/24. Y’all will remember Scott, the toddler toy salesman turned computer millionaire; what, no? Then see my blogpost “OPIS Finis,” 1/18/12.

Judge Goeke doesn’t tell us why telephone testimony is allowed. I would have thought Zoom or equivalent, allowing observation of body language, would be a better choice when credibility of testimony is at issue. You can’t hear sweat or eyes turned away.

Howbeit, here’s what the terms are: “…the witnesses testifying by telephone are directed to complete their testimony: (1) with no notes or other documents/information accessible by them (unless permitted by the Court during the testimony); (2) with no one else present in the room with them; and (3) from a quiet location. If they plan to use cellular phones, the witnesses are also directed to testify from a location that they know to have good reception and to not view any text messages, websites, or other information during their testimony.” Order, at p. 1.

And to avoid the complications described in my blogpost “Oaths in Vietnam,” 3/30/21, “(T)he witnesses must also complete their testimony from the United States, and not be out of the country during the above-referenced Special Session.” Order, at p. 1.

No, not the innocent spousery special. Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan crafts a Rule 103 protective order for whistleblowing  in Thomas Shands, Docket No. 14483-23W, filed 5/3/24.

Tom has been here before, most notably last year, when he got a full-dress T. C. See my blogpost “A Statue in Ogden,” 3/8/23.

But Tom is still in there pitching, with his trusty attorneys hanging in there.

I recommend eyeballing the order, as a template not merely for whistleblowing, but for other Section 6103(h)(4)s. With some custom tailoring, of course.

To lose in Tax Court on a gross receipts adjustment of $2,741,399, and yet reduce a deficiency of $3,111,363 to an ultimate liability of $21,956, earns the trusty attorneys for Michael G. Parker & Julie A. Parker, Docket No. 16021-16, filed 5/2/24, a Taishoff “Good Job, Hors Concours, with oak leaves, swords, and diamonds”.

For the loss, see my blogpost “A Recourse,” 8/14/23.

Said trusty attorneys, alas, must be content with whatever long green Mike & Julie shelled out, and my heartiest congratulations, because Judge Nega said it took Mike & Julie too long to come up with the records that proved their case.

Hence IRS substantially justified, wherefore no Section 7430 legals-and-admins payday for said trusty attorneys.

Of course, IRS folded the chops, and notwithstanding the multi-year delay in Mike & Julie coming up with the stuff, Judge Nega finds (as IRS stiped) that Mike & Julie didn’t unduly protract the proceedings, and they met the dollar limits.

There’s minor argy-bargy over exhaustion of administrative remedies, but “…if a party never receives a notice of proposed deficiency (30-day letter) prior to the issuance of the statutory notice of deficiency and the party does not refuse to participate in an Appeals conference while the case is docketed, that party shall be deemed to have exhausted the administrative remedies available to it for purposes of section 7430(b)(1). Treas. Reg. § 301.7430-1(f)(2); see also § 7430(b)(1) (‘Any failure to agree to an extension of the time for the assessment of any tax shall not be taken into account for purposes of determining whether the prevailing party meets the [exhaustion of administrative remedies requirement].’).” Order, at p. 4.

IRS asked for a Form 872 extender, which trusty attorneys refused. Consent gets you the 30-day letter and a mandatory trip to Appeals (take it, if you want admins-and-legals), but refusal doesn’t.

“Under Treas. Reg. § 301.7430-1(f)(2), petitioners to the Court who never received a 30-day letter shall be deemed to have exhausted the administrative remedies available to them if they participate in an Appeals conference after the case is docketed. In the present case, petitioners never received a 30-day letter and participated extensively in an Appeals conference while the case was docketed with the Court. Accordingly, petitioners are deemed to have exhausted the administrative remedies available to them for purposes of section 7430(b)(1).” Order, at p. 4.

But, as always, there’s a catch; and, as usual, it’s found in a footnote. “Under section 301.7430-1(f)(2)(ii), the taxpayer does not actually need to participate in an Appeals conference while the case is docketed as long as the taxpayer does not refuse to participate.” Order, at p. 4, footnote 4.

The trusty attorneys played the strategic shellgame right. Practitioners, keep this in your toolbox; if you must go to Appeals, when and how you go matters.

The problem that the trusty attorneys can’t solve is digging up the records.

“In analyzing whether respondent’s position was substantially justified, we focus on the documentation available to respondent at the times that respondent stated its position. Respondent issued the notice of deficiency on April 15, 2016, and did not receive any additional information from petitioners other than the information on the face of the Petition between that date and respondent’s answer to the petition on September 2, 2016. For respondent to eventually concede many of the issues in this case, petitioners had to subpoena their own CPAs and spend many years tracking down documentation, with the last documents that led to a concession appearing to have been exchanged three years later in September 2019.” Order, at p. 5.

And that IRS folded a bunch heavy-duty items in the SNOD (hi, Judge Holmes) avails not.

“In the absence of supporting documentation, respondent’s position on each of the issues stated in the notice of deficiency was justified to a degree that would satisfy a reasonable person. Petitioners point to no misapplication of law or mistake in how respondent interpreted facts known to him—instead, petitioners highlight the later good-faith concessions by respondent as somehow establishing that respondent took a position lacking substantial justification. As noted above, the fact that respondent ultimately concedes an issue does not necessarily indicate that respondent’s position was unreasonable.” Order, at p. 5 (Citation omitted).

Judge Nega doesn’t cite Reg. Section 1.6001-1(e), which requires records “shall be kept at all times available for inspection by authorized internal revenue officers or employees.”

There being nothing noteworthy on the US Tax Court website today, I went back over some statistics, furnished me by WordPress, who hosts my lucubrations for a modest fee.

I find that this my blog has been read in 164 (count ’em, 164, and I have) countries, territories, and semiautonomous regions.

I remember a certain whiskey billing itself, many years ago, as “the best in the house in 167 countries.”

Only three to go.

I’ve noted before that one of IRS’ favorite moves from its cubby of happy tricks, feints and ruses is to slip an argument, fact, or admission past a petitioner. I call it submarining.

Here, it’s a Rule 90 Request for Admissions. I am a fan of these. They save time, eliminate factual issues. Of course, one can try to submarine dubious facts and conclusions of law on one’s own account, but beware. Too much gameplaying destroys credibility.

Goldmark Manufacturing, Inc., Docket No. 17866-22, filed 4/30/24, isn’t necessarily an injured innocent, neither it nor its principal having bothered to file income tax returns for the four (count ’em, four) years at issue. Said principal was uncooperative at exam, thus provoking IRS to assert Section 6651(f)(1) fraudulent failure to file chops.

The obligatory discovery joust leaves Goldmark short-stacked for failure to Branerton and make Rule 72 prior requests, before asking for copies of checks that neither IRS nor Goldmark’s bank has, due to passage of time. Judge Courtney D (“CD”) Jones adverts to Section 6001 recordkeeping obligations, but never squarely places the burden on Goldmark. She gives IRS summary J on the deficiencies and one chop (more about that infra, as my expensive colleagues would say) because Goldmark has no facts.

But the submarine comes in when IRS pulls a Rule 90(f)(1) deemed-admitted. Now deemed admissions can support penalties. And for fraudulent failure, a Section 6020 SFR doesn’t count as a return. However, the badges-of-fraud are required, as is clear and convincing proof that failure was willful and fraudulent. Deemed admissions don’t cut it.

“Respondent’s Motion for Summary Judgment relies on the deemed admission that ‘[f]or [the taxable years at issue], petitioner is liable for the penalty for fraudulent failure to file under I.R.C. §[ ]6651(f) in the amounts determined in the statutory notice of deficiency . . . .’ Under Rule 90(a), a request for admission must ‘relate to statements or opinions of fact or of the application of law to fact.’ Respondent’s request for admission impermissibly seeks to admit a legal conclusion.” Order, at p. 10. (Citations omitted).

And without the deemed admission, IRS has only the Michael Corleone gambit, classical variation, to play on the fraudulent failure to file.

IRS does eke out a Section 6655 failure-to-pay-estimateds chop.