Whatever sins, or discipline, it may have brought in its trail, Boechler, P. C. brought a great field of somber reasoning and copious citation of precedent in search of jurisdictional-vs-claim-processing statutory limitations. Judge Travis A. (“Tag”) Greaves is tasked with sorting out for Tax Court bench whether the 90-day cutoff for Section 7436 worker reclassification (EE vs IC) is or isn’t jurisdictional.

Boechler and its predecessors squelched off-the-cuff “drive-by” jurisdictional rulings. Hence the footnote in SECC cuts no ice; see my blogpost “Classified,” 4/3/14 for that one.

Judge Tag Greaves finds Section 7436(b)(2) goes to the rights of the parties, not the right of the court to decide. Thus the belated filer (it’s the usual day-late, dollar-short here, with a non-blessed PDS delivering a day late) is out unless the court finds some way to let them in.

Section 7436(a) bestows jurisdiction without mentioning the 90-day cutoff, and there’s no cross-referencing between (a) and (b).

For law review writers (and I need hardly remind my readers that I never was one), Judge Tag Greaves sorts through how the Supremes have divined what Congress meant, from noscitur in sociis (no) to prior construction (Congress using same magic language from prior statutes found to be jurisdictional in a subsequent amendment to the statute). Of course, since Section 7436 never made it to the Supremes, and hasn’t had a lot of icetime in Tax Court either, there’s not a lot to go on. 8 Cir did, but it was a drive-by. See my blogpost “Drill and Classify – Up In the Air,” 1/13/15. Judge Tag Greaves blows it off.

There’s preliminary argy-bargy about the USPS Form 3877, Firm Mailing Book For Accountable Mail, which is missing a USPS stamp, but Judge Tag Greaves buys the book because the two entries on either side of the disputed entry are properly stamped.

So Tax Court has jurisdiction.

Taishoff says, while this jurisdictional tohubohu makes great blogfodder (and long may it flourish), people’s rights and obligations and how to secure the “just, speedy, and inexpensive determination” thereof should depend on more than haruspicy. If Congress means to stamp out equitable tolling in Tax Court, let them say so. If only for Section 6213 deficiency cases, they should say so.

Btw, the case is Belagio Fine Jewelry, Inc., 162 T. C. 11, filed 6/25/24. And Judge Tag Greaves, while finding no jurisdictional bar here, expressly leaves equitable tolling for another day.

A new form of relief has made its debut on the Tax Court scene. Judge Mark V. Holmes has granted Com’r Danny Werfel leave to “amend his hearing” even though no hearing was scheduled.

See Vallory A. Rosenbledt, Docket No. 16851-21, filed 6/25/24, Order, at p. 2. Exactly how this is to be done is nowhere stated.

What drew me to mention this novelty was an additional, more intentional novelty, a “new form of alleged tax shelter” (Order, at p. 1).

I wish Judge Holmes had been more explicit, even if he threw in a few disregarded possessive genitives at no extra charge. How I yearn for, long for, anything but more phony partnerships, Dixieland Boondockery, enhanced research credits, juiced-up art appraisals, closely-held stock put-and-takes, DADs, sons-of-BOSS and other mix-and-match Bialystoks.

But alas! Judge Holmes wants to know if expert witnesses will be involved. See Order, at p. 1. I do hope not!

A new breed of dodge, hopefully without dueling appraisers, would be as welcome as the Deuteronomy 32:2 treatment.

Dixieland Boondockery churns up silt by the cubic meter. And Tax Court furnishes the cauldron. Here’s Desoto Holdings LLC, Desoto Investors LLC, Tax Matters Partner, Docket No. 13013-20, filed 6/24/24. Of course, chops rain down like an everflowing stream. Judge Elizabeth Crewson Paris has the laundry list.

“… accuracy-related penalties for gross valuation misstatement under section 6662(a) and (h) and, in the alternative, substantial valuation misstatement under section 6662(a), (b)(3), and (e), reportable transaction understatement under section 6662A, substantial understatement of income tax under section 6662(a), (b)(2), and (d), and negligence or disregard of rules or regulations under section 6662(a), (b)(1), and (c).” Order, at p.1.

Of course, it’s a motion for summary J, and with a $25 million claimed deduction on tap, the Destos’ trusty attorneys leave no stone unturned. Who spoke to whom, who supervised whom, who decided what (if anything), who communicated, all is dragged out. Of course, 11 Cir learning gets a good workout; as long as the supe signed while still in charge of RA, whenever before assessment, game over.

Judge Paris reviews the quibbles even though she says she doesn’t have to. And if she doesn’t have to, I certainly don’t.

I said it seven (count ’em, seven) years ago.

“Section 6751(b) is a statutory one-off, a hapax legomenon as that classicist Judge Lauber and that Master of Tohubohu Judge Holmes put it. It’s intended to keep lower-level RAs and Examination types from bludgeoning settlements out of terrified taxpayers by threatening chops.

“But it doesn’t work. It speaks of ‘assessments,’ but the vast majority of those happen automatically, nay, even electronically. Except where IRC says there must be a pre-assessment notice (primarily SNODs, and not even all of those; remember jeopardy assessments), assessments don’t need any advance warning to the taxpayer. And SNODs get reviewed de novo; the past isn’t even prologue. Mox nix what happened at Examination or anywhere else prepetition. Except now it does.

“Besides, the greatest majority of low-level IRS RAs and Exam types are below the radar when it comes to bludgeoning. There never is a deficiency most times. What Tax Court don’t see, Tax Court can’t fix.”

See my blogpost “Stir, Baby, Stir – That Silt,” 12/20/17.

When it comes to tough fact patterns and less than upright clients, nobody tries harder than Frantic Frank Agostino and The Jersey Boys. And he’s got a serious bunch problems (hi, Judge Holmes) with Patricia Controneo, T. C. Memo. 2024-70, filed 6/24/24. Pat’s spouse Frank, insurance broker and breadwinner, goes down in USDCDNJ for bribery and tax evasion. The Federales hit spouse Frank with civil forfeiture at no extra charge.

Spouse Frank and Pat sold their old house and bought a new one, taking draws from spouse Frank’s IRA. Pat contests her liability for the unreported draws, and claims innocent spousery.

Pat’s trusty attorneys pick away at the 1099-Rs reported by the IRS custodian. They claim Section 6201 shifts the burden of proof to IRS when recipients get dubious 1099s.

No, says Judge Elizabeth Crewson Paris. She blows off the quibbles about the 1099-Rs, and then turns to shifting.

“Even if the foregoing points of petitioner’s were treated as raising a reasonable dispute, the consequence under section 6201(d) is not, as petitioner contends, a shift in the burden of proof to respondent. Instead, section 6201(d) would impose upon respondent only ‘the burden of producing reasonable and probative information concerning [the] deficiency in addition to [the] information return.’ Respondent has done so. The contemporaneously maintained business records of [custodian], the authenticity of which the parties have stipulated and to which petitioner has not made any hearsay objection, show that the account from which $122,500 in distributions was made to Mr. Cotroneo… was a traditional IRA. This is reasonable and probative information concerning the deficiency respondent determined on the basis that Mr. Cotroneo received taxable IRA distributions of $122,500 … that were not reported. Thus respondent has satisfied his burden of production under section 6201(d) and the burden of proof remains on petitioner to demonstrate error in the deficiency determination with respect to the unreported IRA distributions.” T. C. Memo. 2024-70, at p. 10.

Pat’s innocent spousery fails in that she and spouse Frank are still married, and the sale of one house and purchase of the other (title only in Pat) is a fraudulent transfer.

Pat further says she didn’t review the 1040 MFJ that was filed shortly after spouse Frank went down.

“Less than four months after Mr. Cotroneo’s plea…, the Cotroneos sold the jointly owned Bernardsville residence for $3,300,000 and received $151,000 in net proceeds from the sale. That same day the Chester residence was purchased for $950,000 in cash and titled solely in petitioner’s name. Petitioner testified at trial that her mother provided $110,000 of the purchase price and that she did not know the source of the $840,000 balance. Given the magnitude of the sum, petitioner’s self-serving professed ignorance of its source—to the extent she would have us believe it did not come from Mr. Cotroneo—is not credible, and we do not credit it.” T. C. Memo. 2024-70, at pp. 20-21. (Citation omitted).

And as for BoP quantum of evidence on fraudulent transfers in the innocent spouse context, here’s Judge Paris’ “somber reasoning and copious citation of precedent.”

“Petitioner contends that respondent must demonstrate by clear and convincing evidence (not merely a preponderance of the evidence) that Mr. Cotroneo and petitioner transferred assets as part of a fraudulent scheme, citing Rule 142(b). Rule 142(b) requires respondent to carry his burden of proof ‘[i]n any case involving the issue of fraud with intent to evade tax” by clear and convincing evidence. We note that section 6015(c)(3)(A)(ii) provides merely ‘[i]f the Secretary demonstrates’ without any reference to his needing to do so ‘by clear and convincing evidence.’ The same phrase—'[i]f the Secretary demonstrates’—is found elsewhere in section 6015(c)(3); namely, in section 6015(c)(3)(C). With respect to that phrase, we have held that it requires proof merely by a preponderance of the evidence. See Culver, 116 T.C. at 195–96. Moreover, the imposition of the clear and convincing standard in Rule 142(b) covers fraud ‘with intent to evade tax’ whereas the ‘fraudulent scheme’ contemplated by section 6015(c)(3)(A)(ii) extends to ‘a scheme to defraud the [IRS] or another third party, including, but not limited to, creditors, ex-spouses, and business partners.’ Treas. Reg. § 1.6015-1(d).” T.C. Memo. 2024-70, at p, 20, footnote 15.

Anyway, no matter which, Pat is out.

But IRS stumbles on the Boss Hossery. IRS claims the chop was imposed by AUR, the SNOD has an AUR control number, hence electronicuted, so no Boss Hossery needed per Section 6751(b)(2)(B). But though the AUR sent CP2000, Pat claims she responded before the SNOD issued, and IRS’ record shows either or both Pat and spouse did, although response not in the record. So IRS can’t prove the Section 6662(a) five-and-ten was electronically imposed.

The Jersey Boys rescued $3K in chops from the wreckage. I said it five (count ’em, five) years ago, and I’ll say it again. “The Jersey Boys never practiced ‘no-fault’ law. Be the ice thin and the sun hot, they will go for it.” See my blogpost “The Taxpayer Bill of Goods – Part Deux,” 6/20/19.

My apologies to all to whom these presents come, who are proficient in the Italian language, for the above solecisms, not to say butcheries, which I only perpetrate to illustrate the tale of the anonymous preparer who inflicts the Section 6662(a) substantial understatement five-and-ten chop on Patrick M. Hall & Brandis J. Hall, Docket No. 3467-23, filed 6/21/24.

Pat & Brandis have a couple dubious Sched Cs on their 1040 MFJ for year at issue (hi, Judge Holmes). Brandis claimed expenses for a nursing business she formerly ran but was “no longer operational” in year at issue, Transcript, at p. 8. And Pat & Brandis folded the deficiency and everything but the chop. Transcript, at p. 4.

Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan, modestly listing herself in this off-the-bencher merely as “Judge,” tells the tale.

“Petitioners used a tax preparer for [year at issue], who did not sign the return. Petitioners hired him because he was recommended by a family member. The preparer prepared prior years of tax returns for petitioners.” Transcript, at p. 5.

Ch J Kerrigan’s above-referred-to modesty has nothing on said preparer, conspicuous by his absence.

“The tax preparer did not testify. Petitioners did not meet the burden of showing that the adviser was competent. Not only did the preparer not sign the return, he reported expenses for a business that was no longer operational. In addition, he reported Schedule C expenses instead of Schedule E Supplemental Income and Loss, expenses.

“Petitioner wife testified that incorrect expenses were reported on their income tax return. She further testified that she did not fully review their tax return before signing it. Therefore, petitioners are liable for a section 6662(a) penalty for substantial understatement for [year at issue].” Transcript, at pp.7-8.

The modest preparer, having consigned these clients to the five-and-ten, can, I am sure, expect a word from IRS. Perhaps some of his clients might expect to hear from the Constitution Avenue crowd as well.

A well-known, much-utilized, estate planning device seeks to devolve the most valuable asset of most people to their descendants in what testators perceive as the fairest way. As with all attempts at fair distribution, it attracts my interest on the occasions when it doesn’t work.

Simply, the device is to bequeath the family home to all children specifically and equally. Abuse has given rise, among other things, to the Uniform Protection of Heirs Property Act. Practicality has bestowed unanticipated tax complexities when one heir seeks to buy out the other. See my blogpost “Life After Federal Tax Consequences,” 6/17/11.

STJ Peter (“HB”) Panuthos illustrates another such in Edward George Shlikas, T. C. Sum. Op. 2024-10, filed 6/20/24. Here, Section 72(t)(2)(F), (8)(D)(i), combine to hit Edward George with 13K via the 10% whatever-it-is and a Section 6662(a) chop.

Edward George was caretaker of Mom’s home and caregiver to Mom. Edward George gave up his job and his rented apartment to move in with Mom during her last illness. Mom, apparently seeking fairness, bequeathed home to Edward George and bro Greg as joint tenants with right of survivorship. In English, this means last man standing takes all.

Edward George thus must buy out bro Greg’s share with cash from his retirement plans, but can’t prove the cash came from an IRA, a SEP, or a SEP/Simple. Thus, the $10K tax-free first-time homebuyer out is not available to Edward George, who is well below the 59-1/2 age cutoff for the Section 72(t) 10% whatever.

Edward George’s arguments about the arbitrary nature of the statute fall flat. Pore l’il ol’ Tax Court can’t help that.

“Petitioner contends that the imposition of the 10% additional tax on early distributions is arbitrary and capricious as the exceptions under section 72(t)(2) establish arbitrary qualifications. He contends it is arbitrary to allow an exception for using a distribution for higher education expenses per section 72(t)(2)(E) but not for the purchase of a home. He alternatively argues that had he made the distribution just 30 days later in 2020 instead of 2019, he would have qualified for the exception made for distributions under the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, § 2202, 134 Stat. 281, 340–43 (2020).

“The Court is a court of limited jurisdiction and lacks general equitable powers.  There is no authority in the Code or caselaw for an equitable or hardship exception to the imposition of additional tax under section 72(t) on early distributions from a retirement account.” T. C. Sum. Op. 2024-10, at pp. 4-5. (Citations omitted).

Word to estate planners: Equal shares may be an easy solution for client and planner. For the beneficiaries/legatees, however, equal is not always fair.

As an Authority even more exalted than STJ Peter (“HB”) Panuthos put it, it comes to bring not peace, but a sword.

Today being a Federal holiday in the City of the Taxed Unrepresented, United States Tax Court is closed.

I cannot therefore provide more than an abbreviated version of Leviticus 25:10: “…proclaim liberty throughout all the land unto all the inhabitants thereof. It shall be a jubilee unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family.”

“Don’t frivol,” says long-time CPA and tax attorney of the year for several years Judge Elizabeth A. (“Tex) Copeland to Vito Manente, Docket No. 1013-23, filed 6/18/24, as she tags Vito, a CPA, not only for his deficiency but that of loved-once Denise. Though they’ve since split, they were married and filed MFJ for year at issue, and her signature on the petition is sufficiently imperfect to put Denise out of court.

Vito tries a “wages aren’t income until you buy something with them” variation on the wages-aren’t taxable Subtitle A – Subtitle C gambit.

“As to the… receipts, Mr. Manente admitted at trial that he would be subject to taxation on ‘gains from labor.’ However, he advanced the unsupported legal proposition that such gains were only taxable if the monies received in return for labor were invested and then sold to convert them to ‘gains.’ He claims wages are not taxable in and of themselves and cited to select text from multiple cases including Supreme Court cases. However, he entirely ignored the ultimate holdings of the cases he cited.” Transcript, at p. 7.

Judge Tex Copeland plays the Crain-Wnuck defense, classic variation.

“We will not further dissect Mr. Manente’s additional unsupported arguments or refute them with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have colorable merit.” Transcript, at pp. 8-9. (Citations omitted).

However, IRS’ trial prep is a wee bit less than stellar.

Vito is in line for a five-and-ten substantial understatement chop, but IRS’ papering only includes a belated declaration from one claiming to be a supervisor, which doesn’t get into evidence because too late for Vito to cross-examine the alleged supe. Judge Tex Copeland isn’t best pleased.

“The evidence accepted into the record does not identify the name of the examining agent who proposed the penalty, so we cannot determine that [alleged supe] was in fact the immediate supervisor of the examining agent who proposed the penalty. While it is clear that Mr. Manente has advanced only frivolous arguments in support of his return position and that his underpayment was substantial, the Commissioner has not met his burden of production for the section 6662 penalty and we cannot sustain the penalty determination.” Transcript, at p. 12.

Wot, no CPAF?

And IRS fails to show Vito and Denise got a tax benefit from a year-at-issue NJ income tax refund in any prior year, thus failing to get that into the deficiency.

Judge Tex Copeland can’t send off Vito without the obligatory Section 6673 yellow card.

“We end by noting that Mr. Manente’s return positions are unbecoming to his position as a CPA. We warn Mr. Manente that under section 6673(a), this Court has authority to impose a penalty of up to $25,000 for making frivolous or groundless arguments in proceedings before us. Because this appears to be the first case that Mr. Manente has brought to trial in our Court, we will not impose a penalty at this time. We may not be so lenient if he repeats his performance in the future.” Transcript, at p. 13.

Edited to add, 4/9/26: I received a comment, purportedly from the petitioner, abusing me and retrying his case. I will not print personal abuse, to whomever addressed. If petitioner is unhappy with the result in his case, he can move to vacate or to reconsider, or appeal. The appellate courts can grant him relief; I can’t. If he is unhappy with the state of the law, let him write his Representative and Senators. They can change the law; I can’t. I report, you decide.

Though the contrast between the two cases is great, here are examples of the lengths to which taxpayers (or rather, nontaxpayers) go to avoid paying up. And what happens when they don’t.

First, Robert W. Smiley, Jr., An Incompetent Person, Margaret T. Smiley, Guardian, et al., T. C. Memo. 2024-66, filed 6/18/24. Rob had an impressive c.v. “Robert was honorably discharged from the Navy in 1964 after serving in a combat zone off the coast of Vietnam. He thereafter became an attorney and was a member of the State Bar of California during the taxable years at issue in these cases. He also served on the faculty of the University of California, Los Angeles.

“During his career Robert held himself out as a leading expert on ESOPs and their implementation.” T. C. Memo. 2024-66, at p. 4. And Rob had the creds to prove it. He was an adjunct professor, lecturer, and co-author of a textbook.

Unhappily, Rob turned to the dark side. When a furniture company with too much cash in its ESOP wanted to sell out, Rob employed a friendly bank teller in a rural supermarket branch, his own longtime personal attorney, and a brigade of controlled entities, to lead IRS on a 46 (count ’em, 46) page steeplechase. And apparently this isn’t the only time he pulled off such a maneuver, although Judge Gale doesn’t want to hear about it. Order, at pp. 41-42, footnote 52.

When IRS Boss Hosses the Section 6663 fraud chop, Rob’s guilty knowledge sinks any defenses he might have had.

“Most significantly, Robert went to considerable lengths to conceal his income and assets. As a general practice, he preferred to work with a specific bank teller who was willing to make transactions for him in a way that would obscure the identity of the originating entity. In the specific context of the S acquisition and the transfers of funds from [overfunded] Plan #010, he channeled money through multiple bank accounts held at different financial institutions in order to hide the sources and destinations of the funds. He also obscured the identities of the lenders who financed the S acquisition, and who would ultimately be repaid with Plan #010 funds, by borrowing money through an entity that was not directly involved in the transaction—namely, M. He covered up the payment of Plan #010 funds to the Smiley Trust by manufacturing sham transactions involving E stock that he reported on his personal income tax return. And the entire scheme was papered over by a trail of Forms 5500 that created an appearance that S might simply have restructured its pension plan, but which actually dead-ended into nonexistent plans that never received any of the money that was supposedly transferred to them.” T. C. Memo. 2024-66, at p. 41. (Names omitted).

Across the country, Atif A. Khan & Huma A. Khan, Docket No. 15025-21, filed 6/17/24, run up only half so many pages as Rob and Margaret, but give Judge Courtney D. (“CD”) Jones a solid workout. True, Huma gets hurt in a vehicle accident, but Atif leaves no stall unoccupied. I haven’t seen so many adjournments (they call ’em “continuances” in Federal courts), or requests to find counsel (despite getting the LITC lists several times), since my salad days in the last millennium in NYC Landlord-Tenant part.

And their first lawyer bails with an ABA Model Rule 3.1 out. Order, at p. 2.

Atif & Human get tossed with a sustained deficiency. And Judge CD Jones gives them the Section 6673 yellow card at no extra charge.

Don’t try either of these gambits at home. Or anywhere else.

“I Sing the Bounce Electronic.” I may sing the bounce electronic, but Hector Manuel Lopez, Docket No. 17719-21L, filed 6/14/24, certainly doesn’t. Told by the SO during his CDP to file some overdue 1040s, Hector claims he did. The SO checked by whatever means were available to her, couldn’t find them, and bounced Hector’s CDP.

Judge Nega tells the story.

“On the Petition, petitioner states that the 2020 tax returns ‘were electronically filed but they were rejected.’ The record does not reflect any attempt to communicate the attempted filing of a 2020 return to SO W during the CDP proceeding. An uncommunicated, unsuccessful filing of a tax return is not, by itself, enough to qualify as timely compliance with SO W’s request that petitioner file his Form 1040 for tax year 2020. We find that SO W did not abuse her discretion in concluding the CDP proceeding and issuing the notice of determination under this timeframe.” Order, at p. 6. (Name and citations omitted).

I see Tax Court is hosting a celebratory outreach to honor Nina E. (“The Big O”) Olson, the long-time honcho of Taxpayer Advocate Service. Might be well if her successor could tell IRS to work out a way to verify bounced filings and let Appeals know that at least petitioner tried to comply. Pro ses don’t know to do that.

Buy Out, Not Sell Out. Every closely-held entity needs a succession plan. The time it takes to settle an estate, or even empower an adm’r/ex’r/persrep to act, in many jurisdictions runs the Ukraine War a close second. Been there, done that (the estate, I mean).

But the plan has to benefit the entity, not the heirs/successors of the succeeded. Smuggling valuable equity to the widow(er)/kiddies at cut-rate prices falls foul of Section 2703. Thus Judge Elizabeth A. (“Tex”) Copeland instructs Estate of Douglas W. Anderson, Deceased, Roger L. Anderson and Beth Anderson, Co-Executors, Docket No. 37600-21, filed 6/14/24.

The co-ex’rs claim the terms of the buyout of the late Doug’s shares in the family C Corp was FMV. Except the kiddies sued the co-ex’rs in PA court, claiming they were swindled, the redemption price of the late Doug’s shares effecting a windfall for the other beneficiaries. They settled out, but the settlement agreement never got to IRS nor to Judge Tex Copeland. Taishoff, an old cynic, isn’t surprised; probably would have sunk their IRS case.

Anyway, the terms of the buyout (appraisal of shares at any time up to 24 months prior to exit), the various appraisals with different amounts, plus the lawsuit (with missing settlement agreement), require a trial. No summary J for the Estate.

Taishoff, an old cynic, says watch this case settle out.