That is, Judge Albert G. (“Scholar Al”) Lauber seems to take his departure from Amanda Iris Gluck Irrevocable Trust, Index No. 5760-19L, filed 3/15/24, based upon a statement attributed to Albert Einstein: “Doing the same thing and expecting a different result is insanity.”

Judge Scholar Al is leaving this case, kicking the same to the general docket “for trial or other disposition,” after again denying summary J both to AIGIT and to IRS. For the previous outings of this saga, see my blogpost “Sue Now, Pay Later,” 5/26/20, and “No Summary J Either Way,” 4/8/22.

So notwithstanding anything in either of the foregoing above-cited blogposts at variance therewith or to the contrary thereof, both AIGIT and IRS are trying for summary J again. No indication that any discovery, formal or informal, has been sought or taken place.

“Petitioners’ motion is largely a reiteration of the summary judgment motion filed on December 2, 2021, which we denied on April 8, 2022. Now as then, petitioners have supplied no factual evidence, merely assertions made on tax returns, to support the critical elements of their argument. And while respondent makes that point convincingly, he has a hard time denying that there remain genuine disputes of material act—chiefly, whether the entries on the tax returns relied upon by petitioners comported with reality. We will accordingly deny both parties’ Motions.” Order, at pp. 1-2.

AIGIT and her two (count ’em, two) sister trusts are indirect partners in a tiered-LLC TEFRA partnership. The issues are whether there is qualified nonrecourse financing giving basis in such partnership, if so how much, and whether the loss which such basis gave AIGIT could be used in the year wherein such partnership terminated per Section 708(b), if it did so terminate in that year.

All AIGIT and her sisters have is entries on their tax returns, and even those don’t match up with the story they now tell.

So Judge Scholar Al has obviously had it with this case.

Now I am a great fan of summary J, as I’ve said often enough.  But enough is enough. We have a State court rule here in Excelsiorland, Civil :Practice Rule 3212(a), that says “any  party may move for summary judgment in any action, after issue has  been  joined;  provided  however, that the court may set a date after which no such motion may be made, such date being no  earlier than thirty  days after  the  filing  of  the note of issue (that’s a statement that discovery is complete or has been waived). If no such date is set by the  court, such motion shall be made no later than one hundred twenty days after the filing  of  the note of issue, except with leave of court on good cause shown.”

I’m not suggesting Tax Court adopt this rule in its entirety, but a Rule stating no motions for summary J unless discovery is complete or been waived, otherwise than by leave of Court on good cause shown, should be adopted. That would stop such charades as these.

It’s Spring cleaning time on Dawson’s Creek. The Genius Baristas have grabbed mops and scrubbies, and will turn to on Saturday, March 16.

Here’s the skinny.

“DAWSON will be offline for scheduled maintenance for approximately 2 hours starting at 11:30pm EDT on March 16th, 2024. During this time users will not be able to access DAWSON, review any case information, or file documents electronically. Updates on this scheduled maintenance will be posted to our Statuspage: https://status.ustaxcourt.gov/“

Tax Court aficiònados will mourn the death of Judge John O. Colvin (on 3/11/24).  Even though the position of Public Affairs Officer remains vacant with no sign that it will be filled anytime soon, the Press Release announcing the sad news gives a proper heartfelt appreciation, quite unlike the recent anonymous departure of a STJ, which had all the air of the locked room with the pistol on the desk, and a single bullet in the chamber. To the contrary, the salute to Judge Colvin was the true 21-gun variety.

And end to another trail comes today, but with all participants standing. Long-time readers of this my blog may remember Lance C. Standifird, T. C. Memo. 2024-30, filed 3/14/23 (happy π day!).  Those new readers should check out my blogpost “The Fraudulent Partnership,” 11/15/17, for the backstory on Lance C. Standifird, RFC (Rounder First Class).

Judge Travis A. (“Tag”) Greaves finds enough badges of fraud in the 2017 off-the-bencher more particularly bounded and described in my aforesaid blogpost above-cited (as my paid-by-the-word colleagues would say) to make Lance RFC a Vulture Scout, but not enough to invoke collateral estoppel (issue preclusion) as to Lance RFC’s fraudulent failure to file personal returns.

“The issue of petitioner’s fraudulent failure to file his personal returns was not in front of the Court in the partnership-level proceeding. There we found that petitioner’s brother signed the partnership returns with an intent to evade tax. In contrast, this case requires us to determine whether petitioner’s failure to timely file his personal tax returns was fraudulent. Additionally, the Court’s discussion of petitioner’s involvement with the partnership’s fraudulent returns was not essential to the determination regarding the extension of the periods of assessment under section 6229(c). In the partnership-level proceeding respondent asserted that petitioner signing the false returns was a basis for extending the periods of assessment. While we acknowledged this argument as possibly true, we found it sufficient that petitioner’s brother signed the false returns regardless of petitioner’s involvement with the returns. Therefore, the issue regarding petitioner’s fraud was not essential to the partnership-level proceeding. Collateral estoppel does not satisfy respondent’s burden of proof on fraud.” T. C. 2024-30, at p. 16.

But because he was treated as a partner in the off-the-bencher, and because the partnership was adjudicated a sham, Lance RFC can’t escape or retry the facts thereat determined. Lance RFC gets nailed.

IRS is submarining again, though, trying to get Section 6651(a)(2) failure-to-file-timely chops post-hearing, although never raising same in SNOD or answer, and never moving to amend answer. Judge Tag Greaves stifles that. “We have jurisdiction to consider an addition to tax ‘if [the] claim therefor is asserted by the Secretary at or before the hearing or rehearing.’ See §6214(a). We will not consider issues that have not been properly pleaded. Respondent has not asked the Court for leave to amend the answer. Thus, the issue of penalties under section 6651(a)(2) is not properly before the Court.” T. C. Memo. 2024-30, at p. 18 (Citations and footnote omitted).

The footnote says IRS tried to use a catchall phrase “as determined in the Notice of Deficiency” in their answer, but they never mentioned Section 6651(a)(2), only Section 6651(a)(1).

Takeaway- Practitioners, watch for these moves, and have your depth charges ready.

Just about two-and-a-half years ago I predicted that Anthony Aulisio, Jr., T. C. Memo. 2024-29, filed 3/13/24, “(S)hould be quite a trial.” See my blogpost “The Limits of Summary J,” 10/4/20.

Was it ever! AA’s testimony (or testimonies, as they were varied) was definitely self-service, when his amended but unprocessed return for year at issue didn’t contradict him. For some samples see T. C. Memo. 2024-29, at p. 16, footnotes 13 and 14.

And AA’s documentation and substantiation fell far short of convincing Judge Alina I. (“AIM”) Marshall.

I’ll spare you the forty (count ’em, forty) pages of her prose.

Few fields so narrow and technical as the Section 41 Qualified Research Expenses (QRE) have generated so much blogfodder. Today it’s Ramesh C. Kapur and Chandra Kapur, T. C. Memo. 2024-28, filed 3/12/24, fighting over a $186K deficiency and $7K of chops for four (count ’em, four) separate years.

All Judge Cary Douglas Pugh has for today is whether to limit discovery to the two biggest items of a random sample of the 2K -3K projects Ramesh’s Sub S and its couple hundred employees worked on (hi, Judge Holmes), or whether to allow IRS to grill 16 of Ramesh’s employees and go through the whole frame. The employees’ wages are the subject of the deficiency.

It comes down to the third leg in the Section 41 table, the “business component” of the claimed additional research. “We note that entitlement to research credits is based on evaluation of each ‘business component.’ § 41(d)(2)(A); Treas. Reg. § 1.41-4(b). A ‘business component’ generally is defined as a product or process that the taxpayer either holds for sale, lease, or license or uses in its trade or business. § 41(d)(2)(B).” T. C. Memo. 2024-28, at p. 2, footnote 3.

IRS says they can’t evaluate the random sample without knowing what business components the research generated, and Judge Pugh buys that.

Now sampling is a generally-applied method when many projects are involved, and a review of every one of them would cost disproportionate time and  money. While this is an unusual case, in that the parties can’t even agree to use a sample at all, here “…petitioners have not given respondent, or us, enough information about all of the projects to determine whether a sample of two to four projects would be a representative sample.” T. C. Memo. 2024-28, at p. 5.

Ramesh claims the two biggest of the sample projects amount to 72% of all the QRE, but that’s not good enough for Judge Pugh.

“Evaluating compliance with section 41 necessarily involves consideration of the underlying business components. And petitioners agree that they have the burden of showing entitlement to the claimed research credits. See Feigh, 152 T.C. at 270. As we have said previously, ‘[a]bsent an agreement between the parties, project sampling improperly relieves the taxpayer of its burden of proving entitlement to the research credit claimed.’” Betz v. Commissioner, T.C. Memo. 2023-84, at *77 n.30 (citing Bayer, 850 F. Supp. 2d at 538, 545–46).” T. C. Memo. 2024-28, at p. 5.

For Feigh, see my blogpost “The Golden Gophers vs Scholar John – Part Deux,” 5/15/19; for Betz, a/k/a Lincoln, see my blogpost “Uncertainty, Investigation, Experimentation,” 7/6/23.

Of course, there’s always a Plan B, and Judge Pugh has got it.

“to the extent that petitioners believe that the expense is disproportionate they can limit their claim to research credits for QREs relating to the two projects they represent should be the sample. But if they claim more research credits, they must be prepared to substantiate QREs. And nothing bars petitioners from identifying information regarding business components in the sampling frame that then might allow respondent to agree to a representative sample.” T. C. Memo. 2024=28, at p. 6.

So while y’all are sorting out the sample, chaps, file some status reports.

George Thompson’s million-selling 1913 comic monologue reappears as Judge Elizabeth A. (“Tex’) Copeland provides Patricia S. Chappell,  T. C.  Sum. Op. 2024-2, filed 3/11/24, with a Cohan approximation for the cellphone use, equipment,  and “service charges” for the cellphones she and her son used in her tax prep business.

Used to be that cellphones required strict substantiation, like automobiles, but not any more since 2009. Judge Tex Copeland allows more of what Patricia paid during tax season (January through May), and part of what she paid for her son’s phone, despite a written IC agreement with son that he would pay all his own expenses. “…it is not unusual to provide cell phones to independent contractors in order for them to speak to the business’ owner and its clients.: T. C. Sum. Op. 2024-2, at p. 7, footnote 5. That lets the owner avoid call waiting while IC talks to friends on personal phone. And buying the phones invokes Section 179 expensing, even if not claimed as such.

Patricia’s vehicle expense substantiation is truly substandard, but she can show business travel from home office to satellite office, and other trips, so she gets the standard mileage for the business miles her testimony proves, based on what her cellphone software pulls via GPS.

See my blogpost “Pilot Saved by GPS,” 11/14/18, for a similar story.

And Innocent Spousery Loses

Judge Ronald L. (“Ingenuity”) Buch says Congress meant pore l’il ol’ Tax Court to be limited when innocent spousery is on the table. Paul Andrew Frutiger, 162 T. C. 5, filed 3/11/24, wants innocent spousery. He and spouse got separate NODs; she petitioned hers timely, he was two (count ’em, two) days late.

Paul gets fire support from The Center for Taxpayers Rights, but that doesn’t help. While the veterans’ benefit cases the amicus cite do show Congress cared about giving veterans a break (mirabile dictù), there are several deadlines in 42 U.S.C. § 1395oo(a)(3), and Congress wasn’t talking jurisdiction to Judge Ingenuity Buch’s satisfaction anywhere.

But Section 6015(e)(1)(A) is a specific grant of jurisdiction to Tax Court.

“It provides that a ‘[taxpayer] may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief . . . if such petition is filed . . . not later than the close of the 90th day after the date described in clause (i)(I).’ I.R.C. § 6015(e)(1)(A) (emphasis added). Section 6015(e)(1)(A) expressly provides ‘jurisdiction’ with respect to the Tax Court’s power to hear innocent spouse cases. And while this alone is not enough, see Boechler, P.C. v. Commissioner, 142 S. Ct. 1493, there is a clear link between the parenthetical that contains the jurisdictional text and the 90-day filing deadline; the filing deadline reads as a prerequisite to the Tax Court’s jurisdiction.” 162 T. C. 5, at p. 7. (Emphasis by the Court).

And though parentheticals are afterthoughts or asides, the parenthetical in Section 6015(e)(1)(A) is the real deal.

“In this instance, we do not place any interpretive weight of Congress’s placing the jurisdictional grant in a parenthetical. In Boechler, the Supreme Court noted that a parenthetical ‘is typically used to convey an ‘aside’ or ‘afterthought.’” Boechler, P.C. v. Commissioner, 142 S. Ct. at 1498 (citing Bryan A. Garner, Modern English Usage 1020 (4th ed. 2016)). But in the immediately subsequent paragraph, the Supreme Court cited the parenthetical of section 6015(e)(1)(A) for its relative clarity. Boechler, P.C. v. Commissioner, 142 S. Ct. at 1498–99. 162 T. C. 5, at p. 8, footnote 3.

Yeah, maybe it is dicta, but lower courts don’t blow off the Supremes’ dicta, because it might just could maybe so let the peasants know what their High Mightinesses are thinking.

Yes, innocent spouses are often the victims of abuse, and Congress wants to protect them.

“But just because section 6015 was enacted under taxpayer-favorable legislation does not mean that Congress intended for the filing deadline of section 6015(e)(1)(A) to be nonjurisdictional. As we have stated, section 6015 contains both equitable and nonequitable components. It being enacted under taxpayer-favorable legislation does not make every part of it equitable. Concluding that the filing deadline of section 6015(e)(1)(A) is nonjurisdictional because it was enacted under RRA Title III would require us to go against the clear statutory text and make statutory context the deciding factor. We decline to do so. ” 162 T. C. 5, at p. 11.

RRA was the IRS Restructuring and Reform Act of 1998, the wonderful enactment that gave us the judicially-hobbled Section 6751(b) Boss Hoss. Taishoff says Congress giveth and the courts taketh away.

A brief docket search looks like Paul is Golsenized to 9 Cir, no immoderate pals of the “small court.” Maybe an appeal is coming from the amicus. I’ve reached out to Mandi L. Matlock, Esq., Paul’s trusty attorney, for comment, and to receive a Taishoff “Good Try.”

Judge Albert G. (“Scholar Al”) Lauber comes to the aid of a defunct building contractor, whose trusty attorney, a Jersey Boys alumnus, has to bail in a fee dispute with the client’s principal, after another Tax Court Judge blew off one IRS attempt at summary J.

IRS is still on shaky ground, as Judge Scholar Al treats IRS’ motion for summary J 2 as contested by petitioner, even though “(U)naided by counsel, petitioner did not respond to the Second Motion by our … deadline. However, because respondent’s two Motions are substantially identical, we will treat petitioner’s Objection to the First Motion as responsive to both.” Order, at p. 3.

The issue is unpaid self-reported FICA/FUTA/ITW, which the SO at Appeals refused to let petitioner contest, because self-reported. IRS admits the SO was wrong, and Judge Scholar Al has citations to prove it. A petitioner can contest self-reporteds at Appeals.

Petitioner claims CNC because its only assets are claims against a general contractor who owes it money and is also defunct, and petitioner is broke, a not-unfamiliar story to NY dirt lawyers. Why the petitioner didn’t lien the job is also a good question, but that’s for another day.

IRS claims the footfault at Appeals was “inconsequential,” because petitioner didn’t raise liability at Appeals. Judge Scholar Al says they did, but the SO shut them down.

So back to Appeals for Accolade Construction Group, Inc., Docket No. 793-22, filed 3/8/24, a red-letter day in our family’s calendar.

And Judge Scholar Al stays with the case.

When confronting low-or-no-income operations, IRS seems to be claiming indocumentado in the SNOD, but raising both hobby loss (Section 183 goofy regulation) and Section 195 start-up in the runup to trial. Today Judge Ronald L. (“Ingenuity”) Buch lets it in.

Matthew M. Hutchings & Shari L. Hutchings, Docket No. 13321-20, filed 3/7/24, have been here before. See my blogpost “Expand Rule 51,” 12/22/23. Matt & Shari did substantiate most of their claimed expenses, although they flunked vehicle use (but is a Ford F350 really a passenger vehicle, Judge?) and some construction stuff.

But today they lose an off-the-bencher, and the facts are pretty nearly a walkover for IRS, even though Judge Ingenuity Buch gave IRS BoP on hobby loss and startup.

“Happy Eating [the Hutchings’ operation] did not have an official website or present itself to the general public. It did not have separate bank accounts, credit cards, or records. The supplies used to repair and maintain the property were purchased using the Hutchings’ personal credit cards. Furniture and services were purchased using the Hutchings’ personal credit cards. Creditors were paid using the Hutchings’ personal credit cards or with personal checks or wire transfers from the Hutchings’ personal bank accounts. The Hutchings did not treat Happy Eating as an active trade or business.” Transcript, at p. 14.

True, Shari ran a couple soft openings (hi, Judge Holmes) in year at issue and subsequent year, but these were market tests where she got reactions but no diñero; maybe she might have made money down the road, but she didn’t try in year at issue.

Matt’s & Shari’s trusty attorneys L&L did well to shift BoP, but the facts remain.

And remember, starters-up, get a bank account and a business credit card for the new venture off the bat. You maybe so can’t get a toaster from the bank anymore, but they could give you cash and you might could just save your deductions.

I had to find a substitute for the worn-out shot-across-the-bows cliché, so I took my simile from the PRC-Philippines Second Thomas Shoal standoff. But the story is the same: Tax Court’s adoption of the one-explicit-warning before handing out a Section 6673 frivolity chop.

Today’s contestant is Charles Scott and Linder Scott, T. C. Memo. 2024-27, filed 3/7/24. They’ve tried the same arguments before (see T. C. Memo. 2024-27, at p. 3), but Judge Courtney D. (“CD”) Jones put paid to them in the Order cited in this opinion.

Now Judge Christian N. (“Speedy”) Weiler has Charles’ latest attempt to resuscitate his previous losers.

“In a prior proceeding we ruled against these same petitioners, considered these same arguments, and ultimately determined that these disability payments to Mr. Scott are taxable, since we found no evidence to suggest that the payments at issue were attributable to an injury or sickness sustained through Mr. Scott’s active service in the armed forces, the Coast and Geodetic Survey, or the Public Health Service. See Scott v. Commissioner, No. 3330-18 (T.C. Oct. 22, 2021) (No. 52).

“Again, considering the evidence before us, we hold petitioners’ argument to be without merit, and we will sustain the adjustment to income as determined in the notice of deficiency.” T. C. Memo. 2024-27, at p.3.

I didn’t blog Charles’ 2021 case, as there was a more interesting Child Tax Credit case that day.

But Judge Speedy Weiler opens the valve on the water cannon.

“We take this opportunity to warn petitioners that the continued assertion of these same arguments, having now been considered twice by this Court, may result in a penalty of up to $25,000 under section 6673(a).” T. C. Memo. 2024-27, at p. 3.