And the new item is inventory, an addition to IRS’ avoid-trial-at-any-price contestable readings of Section 170, specifically Section 170(e). Judge Christian N. (“Speedy”) Weiler brushed off IRS’ attempt to add this to IRS’ attack on Jackson Crossroads LLC, Greencone Investments LLC, Tax Matters Partner, et. al., Docket No. 12235-20, filed 3/6/24. But IRS wants Rule 161 Reconsideration, based on “Rock Cliff Reserve, LLC et. al. v. Commissioner (Docket No. 12472-20) and Order dated November 15, 2022, in Oconee Landing Property, LLC et. al. v. Commissioner (Docket No. 11814-19).” Order, at p. 2, footnote 2.

The brushoff in question took place back on 1/19/24, a special date in our family. For the brushoff, see my blogpost “When Fact Met Law,” 1/19/24.

Now reconsideration in light of other Tax Court orders is a bit novel.

“Unlike motions for reconsideration of findings of fact and opinions, there is no specific rule governing the standards with respect to motions for reconsideration of Orders of this Court. See Rules 161 and 162, of the Tax Court Rules of Practice and Procedure. Under Rule 161, reconsideration is intended to correct substantial error, either of fact or law, and facilitates the introduction of new evidence the moving party could not have previously introduced with due diligence. However, reconsideration is not the appropriate forum for rehashing previously rejected legal arguments or for tendering new legal theories to reach the end result desired by the moving party. Deciding whether to grant a motion for reconsideration lies within the discretion of the Court.” Order, at p. 2 (Citations omitted).

Here, the FPAA, which the Jacksons claim never raised inventory, raised a general “you didn’t comply with Section 170 and the Regs” which IRS claims puts in play treatment of “property held for sale in ordinary course.”

Judge Speedy Weiler buys it.

“Although these orders are not formal precedential decisions or reports of this Court; we are inclined to reconsider the issue on brief. Furthermore, after hearing the evidence in this case, we find there is no unfair surprise or prejudice to consider the Inventory Issue on brief. Furthermore, petitioner remains free to argue, on brief, that respondent has failed to properly plead the Inventory Issue or that the issue has no application in this case.” Order, at p. 3.

For Rock Cliff, see my blogpost “Broad Spectrum,” 9/13/23. I blogged the quoted Oconee order for Judge Albert G. (“Scholar Al”) Lauber’s take on expert witness testimony, not the inventory bit.

Takeaway- All the evidence about attempted subdivisions and sales of houses, with co-ventures with developers, to show before HBU, is a double-edged sword; was the land held for development and sale rather than for investment? Inventory? Fact question, but tricky.

Let me be clear, I’m not starting, engaged in, or continuing a vendetta or nitpicking party  against IRS. Neither am I claiming holier-than-thou status, whether against petitioners, intervenors, or respondent. Sloppiness should be called out, because we’re all prone to taking the shortcut or the slippery slope.

Yeah, I’ve been called a curmudgeon. By the second generation member of a family I represented on and off for over forty years. I’ll accept that. But I’ll say it again: sloppiness, whatever its source, should be called out.

I know IRS is shortfunded, shortstaffed, and shortstacked, especially when dealing with hangovers from Congress’ strewing of unguided largesse on taxpayers fleeing to Our Insolvent Islands in the Sun, as more particularly encountered in Amgen Inc. & Subsidiaries, et. al., Docket No. 16017-21, filed 3/5/24.

Judge Travis A. (“Tag”) Greaves shoots down this try at a Rule 91(f) quick-kick facts-and-evidence-deemed-established OSC because IRS’ counsel tries for an inside-the-park without touching first, second, or third. Or even hitting the ball.

The parties were sparring over segmented P&Ls, which Amgen first claimed they didn’t have, but thereafter came up with some of the years at issue. Following back-and-forth on the completeness and accuracy thereof, IRS sent Amgen its version, and a stipulation consenting to same, which failed to attach the exhibits referred to therein. Amgen objected.

Judge Tag Greaves: “Respondent’s motion is deficient in several respects. First, respondent failed to attach to his motion the segmented financial statements referenced in his draft Joint Third Stipulation of Facts Second Financial Stipulations as required by Rule 91(f)(1)(B). Without these exhibits, we will not require petitioner to stipulate to their accuracy. Respondent’s motion further fails to set forth sources, reasons, and basis for claiming that the financial statements should be stipulated as required by Rule 91(f)(1)(C). Respondent did not explain the documents he consulted nor his process in constructing the segmented financial statements. Finally, respondent’s motion did not show that petitioner had reasonable access to this information in accordance with Rule 91(f)(1)(D).” Order, at p. 3.

Moreover, Amgen disputes the accuracy of the latest iteration of the statements. And the parties did seem to be working on discovery in good faith.

Now, it’s true that Amgen (and the Subsidiaries) have deployed 21 (count ’em, 21) lawyers, only one of whom is in-house and the balance ultra-whiteshoe, but IRS has 16 (count ’em, 16) to oppose, not exactly Davey-Crockett-Alamo odds. So why not follow the Rule 91(f) checklist? IRS knew about Amgen’s objections at the end of December, Order, at p. 2. Check my chronology there.

Motion for OSC denied.

This Golden Oldie is most often used to bar petitioners from injecting IRS’ Exam miscues and delictions into a deficiency de novo trial. The past isn’t even prologue.

So while Curtis K. Kadau & Lori A. Kadau, Docket No. 286-21, filed 3/4/24, may have told Exam a different story (in writing) than they told on the stand at trial, IRS can’t avoid being run over by Greenberg’s Express, 62 T. C. 324 (1974), when they try to introduce documents Curtis & Lori gave Exam and Appeals.

Judge Christian N. (“Speedy”) Weiler tells it.

“The government often argues that materials relating to a taxpayer’s audit or administrative proceedings are irrelevant because the issues before this Court are de novo. See Greenberg Express, 62 T.C. 327; see also Moya v. Commissioner, 152 T.C. 182 (2019). This argument is predicated on Section 6214(a), through which, upon a timely filed petition, we have jurisdiction to redetermine the correct amount of the deficiency.

“In Greenberg’s Express, 62 T.C. at 328, we explained that, because a trial before the Court is a proceeding de novo, the Court’s ‘determination as to a petitioner’s tax liability must be based on the merits of the case and not any previous record developed at the administrative level.’ The principle articulated in Greenberg’s Express – that the Court will not generally look behind a notice of deficiency – has been repeatedly upheld by appellate courts.” Order, at p. 2. (Copious citation of precedent omitted).

Taishoff says that Moya is a weak reed to support Greenberg’s Express. See my blogpost “The Taxpayer Bill of Goods,” 4/17/19. I said then “this case was hardly well-litigated, and I’m sorry we didn’t get a better fact pattern and record in a precedent-setting case.” We had a pro se and a muddled argument from IRS; Judge James S. (“Big Jim”) Halpern deserved better, and so do we.

“While in this case it is respondent who seeks to offer and introduce documents petitioners furnished in audit, we find the documents to be immaterial as they were not introduced by petitioner, nor were they offered as impeachment evidence by respondent during cross-examination.

“We conclude that our holding in Greenberg Express applies here and precludes the introduction of these three administrative documents. Our redetermination of petitioners’ tax liability will be based on the merits of the case and the record, as developed at trial.” Order, at p. 2.

Amazing! Eight (count ’em, eight) attorneys from IRS, and no one picked up on prior inconsistent statements to impeach.  See FRE §613.

No, not a London pickpocket, a Debtor-In-Possession, the Chapter XI trustee of his own bankruptcy estate. Gregory K. Crowell petitioned a NOD from the CDP in the name of Gregory K. Crowell Bankruptcy Estate 17-13624, Index No. 19992-22L, filed 3/1/24.

Problem was, USBCSDOH had confirmed Greg’s plan of liquidation, and had appointed THB (name omitted) trustee of the liquidating trust set up thereunder. Nevertheless, Greg apparently signed a subsequent 1041 for the trust, despite the trust agreement’s directive that THB file 1041s. Howbeit, by the time this landed on STJ Adam B. (“Sport”) Landy’s desk, USBCSDOH had confirmed the plan, all trust reports and distributions had been filed and made, and TBH had been discharged and released. There is no record of appointment of a subsequent trustee.

True, a DIP has all the powers and duties of a trustee in a Chapter XI prior to confirmation of a plan of reorganization. Thereafter, all the foregoing vests in the court-appointed trustee, as the bankruptcy estate ceases to exist, and the liquidating trust takes its place. Greg was ousted by operation of law eo instante.

STJ Sport Landy tosses Greg’s petition for want of a petitioner with proper authority.

OK, let us suppose Greg runs back to USBCSDOH, seeks appointment as successor trustee to TBH, and gets appointed. Equitable tolling?

STJ Adam B. (“Sport”) Landy touches a subject dear to my heart (and the heart of every one of us in our profession) in Amy E. Grammer, Docket No. 28440-21, filed 2/29/24. Aided by her trusty CPA and fifty-year-veteran trusty attorney, Amy and team got IRS to stip down $123K in deficiencies (two years’ worth) and drop $25K in chops; of course, the stip is unavailable online, but if IRS isn’t fighting Amy’s eligibility for Section 7430 admins and legals, Amy and team must have done enough to warrant a Taishoff “Good Job.”

As for trusty attorney, who retired the end of last year after this triumph, he gets the schedule hourly rate, and better yet, his hours don’t get cut. And they are truly modest, showing the dude knew his stuff and wasn’t running the meter. Amy couldn’t prove either that available legal talent around her homeplace (Dalton, GA) was scarce (a local lawyer testified as to the going hourly rate there for tax controversy work, so STJ Sport concluded there was more than one lawyer working that gig), or that trusty attorney brought different or nontax know-how to the fray.

Trusty CPA gets paid some, but his non-IRS-admitted staff, for whose time he billed, get nothing. Exactly where in Section 7430 admins are limited only to payments to IRS admittees is nowhere stated. Proceedings may take place before the IRS which require extensive preparation and staff work, more efficiently performed by non-admittees.

Congress amended Section 6501(l) effective 12/29/22. The amendment stated that filing a 1040 without a Form 5329 (excess IRA contributions) is sufficient to start a 6SOL running on assessment.

Judge Albert G. (“Scholar Al”) Lauber says the amendment applies to returns filed on or after 12/29/22. Judge Emin (“Eminent”) Toro says Judge Scholar Al went too far: the statute limits IRS’ ability to assess tax. Doesn’t matter when the return was filed; if no SNOD within 6 years thereafter IRS can’t assess the 6% excess contribution chop.

But that doesn’t help Clair R. Couturier, Jr., 162 T. C.4, filed 2/28/24. His return was filed away back in 2005; IRS issued the SNOD in 2016, which Clair timely petitioned. The old Paschall-Mazzei law applies. See 162 T. C. 4, at p. 6.

For Paschall, see my blogpost “Dies Ira,” 7/5/11; for Mazzei, see my blogpost “Caligula In Tax Court?” 3/5/18.

Judge Emin (“Eminent”) Toro, leading the concurrence squad, says Judge Scholar Al went too far, and took the majority with him. The issue isn’t returns, it’s assessment. The whole of Section 6501 deals with when IRS can assess. Clair loses because IRS could’ve assessed pre-2022, except the automatic stay in Section 6213(a) prevented that while Clair and his trusty attorneys invoked the leisurely litigation practices of Tax Court. But for anyone who hadn’t been hit with a Section 4973 SNOD sooner than six (count ’em, six) years prior to 12/29/22, it’s “homefreeall!” as we used to yell on the sidewalks of The Bronx so long ago.

Ex-Ch J Maurice B. (“Mighty Mo”) Foley is joined by Judge Alina I. (“AIM”) Marshall in dissenting. The rest of y’all have found ambiguity where there is none. The statute is clear; if a 1040 was filed pre-12/29/22, that’s it. The statute is not “purely prospective.”

“Congressional scriveners do not need our drafting assistance. While Congress implemented narrower effective dates for other provisions in the Act, it, notably, did not do so here.” 162 T. C. 4, at p. 43.

Scorecard: Ch J Kerrigan, Judges Nega, Pugh, Ashford, Copeland, and Weiler go with Judge Lauber. Judges Buch, Urda, Jones, and Greaves are with Judge Toro. So it’s 7-5-2.

See my blogpost for “FIIK,” 4/19/18, for what happens with a fractured opinion like this one. Exactly what did Tax Court decide?

•                   *                     *.                   *.                     *

Please pardon a late posting, but the premiere of Turandot didn’t finish until almost 2300 last night; the debuts of Oksana Lyniv at the podium, and Elena Pankratova in the title role, a Ukrainian-Russian collaboration mediated by an Italian that I pray becomes universal, were a better way to spend the evening.

No, not another incursion by the Supremes into pore l’il ol’ Tax Court’s minuscule jurisdiction. This is Judge Courtney D. (“CD”) Jones exhibiting restraint and invoking the “yellow card before the Section 6673 chop” for self-represented protester/defiers.

Judge CD Jones has Jeffrey Dominic Grinaldi, Docket No. 1288-23, filed 2/27/24, making his second appearance at The Glasshouse in the City-NonState. He stiped out at the last one, so no published order, much less opinion. I will again point out, as have more vehemently my colleague Mr. Paul Streckfus of EO Tax Journal and Prof. Leandra Lederman at U of IN, that these stipulated decisions should be made available online. See my blogpost “Made Available for Public Inspection,” 11/9/18.

Casting aside the Tax Court prime directive, Jeff and IRS have a multi-motion joust, resulting from “both respondent and petitioner’s declinations to schedule a Branerton conference.” Order, at p. 2.

Judge CD Jones blows off Jeff’s motions, and sets IRS’ request for a Rule 103 protective order down for a hearing. I’m sure it’ll be quite a hearing.

Howbeit, Jeff does get a bye on the Section 6673 frivolity chop, exemplifying the caption or title first set forth at the head hereof, as my “Yes, I’ll have another Grey Goose Gibson with a little less Dolin’s, please” colleagues have just said.

“Mr. Giraldi has previously been a litigant before this Court. See Docket No. 15190-19. Respondent states that in that case, Mr. Giraldi made similar types of arguments to those he advances in the instant case, but that respondent leniently did not move to have the Court impose a penalty pursuant to section 6673. Upon review of the record at Docket No. 15190-19, that case was resolved by stipulated decision, and it does not appear that the Court warned Mr. Giraldi of the possibility of requiring him to pay a penalty to the United States of up to $25,000. Accordingly, we will not impose a penalty under section 6673 at this juncture, and we will deny respondent’s Motion to Impose a Penalty without prejudice to renew.” Order, at p. 4.

However, lest Jeff get too elated, “we admonish Mr. Giraldi that if he raises frivolous arguments before the Court, respondent could file another motion to impose a penalty, or the Court, on its own motion, could impose a penalty under section 6673.” Order, at p. 4.

So play nice, chaps, and show up in all respects ready to try the case at calendar call.

“Your witness.” We’ve heard those words, or uttered them our own selves, in either case often with a mere soupçon of a smirk, after what an adversary or we thought was an incisive direct or devastating cross. But I’ll wager none of us ever heard the reply Judge Mark V. (“Vittorio Emanuele”) Holmes imputes to IRS in Ardan Holdings, LLC, Ardan Investors, LLC, Tax Matters Partner, Docket No. 17483-21, filed 2/26/24, although the Order is dated 2/23/24.

When we left the battling litigants just shy of The Midnight Hour Friday night 2/23/24, I was awaiting Judge Holmes’ sort-out of IRS’ red-hot last minute attempt to wild-card in unnamed individual witnesses from eleven (count ’em, eleven) different outfits, after the scheduling order cutoff for listing trial witnesses.

If you spent the week-end as sober as I did, you’ll remember that Judge Holmes was quoted in my blogpost “Select Or Settle,” 2/23/24, as saying he would deal with this. Naturally, as trial was supposed to start today, I asked “when?”

Never doubt Judge Holmes. He must have burned enough midnight oil significantly to increase his personal carbon footprint. One contestant was easy enough.

“…we find good cause for one of respondent’s newly-discovered witnesses—Walter Allen McCannon—whose former company, McCannon Granite Company, is one of the entities disclosed in his pretrial memo. Insofar as Mr. McCannon is respondent’s sole witness for the organization identified in his pretrial memo as McCannon Granite Company, we’ll easily deny petitioner’s motion to exclude.” Order, at p. 2.

Now of course there’s concern with eve-of-trial blind-side wild-cards. “We recognize petitioner’s concerns about the ability to prepare and cross-examine a witness that hasn’t been properly identified before trial. That could be cause to grant the remainder of petitioner’s motion.” Order, at p. 2.

Except.

“Petitioner, in its pretrial memo, names nine of the remaining 10 organizational witnesses as witnesses of its own. These include all of the 11 organizational witnesses that petitioner is trying to preclude from testifying except for the Mine Safety and Health Association.” Order, at pp. 2-3. (Footnotes omitted).

These outfits aren’t rebuttal witnesses, as the Ardans name their rebutters in their pre-trial memo, and these outfits ain’t them. Rule 30(b)(6) lets a litigant subpoena an organization, and let the organization decide whom to send to testify.

IRS would only be sandbagging the Ardans if they knew whom the outfits were going to be sending to testify, and no one claims IRS does know.

And of course depositions are the exception, not the rule, in pore l’il ol’ Tax Court.

I couldn’t find today’s trial session on the Tax Court website. I wonder if this case actually went to trial.

BREAKING NEWS: I received confirmation at 8:44 a.m., 2/27/24, from Judge Holmes’ chambers that trial began yesterday, 2/26/24, in Columbia, SC. La partie continue.

One who appeared on this my blog a couple years ago (hi, Judge Holmes) attempted to post a political advertisement as a comment to the post wherein he had appeared.

I rejected the advertisement.

Just to repeat what appears under the “Privacy Policy” head on the homepage, “WordPress.com posts advertising on this site, over which we have no control of any kind whatsoever. We cannot control how third parties may use anything you disclose to them, so you should carefully review the privacy policy of any third-party Web site you visit before using it or disclosing your personal information to it.”

I’d add to the foregoing that I receive no compensation from WordPress.com or any affiliated person or entity (in fact I pay them).

I won’t accept advertising on my this my blog, for liability reasons.

PLEASE TAKE NOTICE that, if any of this garbage blows up, kills, or maims, I had nothing to do with it.

I do not know if Judge Cary Douglas Pugh reads this my blog, but she and I certainly agree about the gameplaying and time-wasting which has subverted Tax Court discovery from discovery through informal consultation or communication before resorting to formal discovery procedures, Rule 70(a)(1), into “scorched earth” bushwhacking last-ditchery, better perpetrated by what my alma mater On The Hill Far Above called “swarms of hastily-prepared pettifoggers.”

I’ll spare my readers (and myself) another exegesis anent the deliberative privilege, more particularly bounded and described in Sydney Roads, LLC, Sydney Roads Investments, LLC, Tax Matters Partner, Docket No. 30287-21, filed 2/23/24. And the sealing-vs-unsealing joust over some IRS IM chitchat before an OCC seminar on (surprise) Dixieland Boondockery.

Those who care about this tempest in a pot can check out Order, at pp. 2-4. Briefly, internet chitchat is not deliberative, isn’t privileged, wasn’t sealed, and won’t be. And IRS’ motion to strike deals with stuff that would be allowed in on the trial. Briefly, guys, fuggedaboutit.

But the point is (and my readers doubtless will cry with one voice “A point? How novel!”) what Tax Court STJs and Judges have in common with me.

“The Court will decide the issues pled by the parties on the basis of the admissible evidence at trial and urges the parties to refrain from distracting themselves or the Court with filings that the Court might characterize as ‘redundant, immaterial, impertinent, frivolous, or scandalous.’ The Court urges the parties to focus on trial preparation and limit motions to those that deserve more than a stamp vigorously denying them.” Order, at p. 4.

As the great Andrew Dickson White put it, law school should produce “a fair number of well-trained, large-minded, morally-based lawyers in the best sense.”