Some might think Immunologist Edward Francis Bachner, IV (EFB4) more than a bit of a rogue, if they read Judge Morrison’s account of EFB4’s doings in Edward Francis Bachner, IV and Rebecca Gay Bachner, T. C. Memo. 2023-148, filed 12/13/23, or my blogpost “On Information and Belief,” 10/4/23..

Besides EFB4’s talent for fictional W-2s, life insurance applications, and Forms 1040 MFJ, it is alleged he sought to knock off Rebecca Gay for the $20 million insurance policy he placed on her life.

Judge Morrison deals with jurisdiction. The SNOD is addressed to both EFB4 and Rebecca Gay, although Rebecca Gay gets total innocent spousery; innocent spousery of one party doesn’t efface Tax Court jurisdiction on a timely filed petition.

Likewise, fraud chops alone are enough for deficiency jurisdiction. “A notice of deficiency that determines a fraud penalty under section 6663, but no deficiency, is a valid basis for the Court to take jurisdiction (upon the filing of a timely petition) to determine the amount of the underpayment and the amount of the underpayment due to fraud.” T. C. Memo. 2023-148, at p. 25. (Citations omitted).

As for jurisdiction over Rebecca Gay, deficiency jurisdiction includes possible overpayment, so an innocent spouse may still be in the money.

And even when jurisdiction is lacking for one spouse, that does not let the other off the hook.

As for fraud, you can read for yourself, T. C. Memo. 2023-148, at pp. 29-35.

EFB4 bought tetrodotoxin, wherewith allegedly to dispose of Rebecca Gay. This is a neurotoxin, which in tiny, almost undetectable, amounts is deadly. It’s found in puffer fish, a Japanese delicacy, preparation of which is restricted to chefs of grandmaster status because of the risk to the gourmet. It features in the late mystery writer and champion jockey Dick Francis’ 1991 thriller “Comeback.”

So what could EFB4’s “redeeming quality” be?

I am a great fan of the late Dick Francis’ work. If EFB4 is too, that may be his only redeeming quality.

I didn’t blog John Thomas Minemyer, T. C. Memo. 2020-99, filed 7/1/20 when it came out; it was just another blown Boss Hoss (mention of fraud penalty before Boss Hoss sign-off). But then 10 Cir filled the inside straight that 9 Cir and the Elevenses are playing, picking up on Kroner and Laidlaw’s Harley Davidson (whenever, as long as supe is still supe). 10 Cir affirmed the deficiencies but reversed on the chops, reinstating same per ex-Ch J. Michael B (“Iron Mike”) Thornton’s monumental dictionary chaw (see my blogpost “Money-Back Guarantee Meets the Boss Hoss,” 11/30/16).

Judge David Gustafson and I ain’t doin’ so well.

So Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan has to decide if civil fraud chops should be applied to JT’s offshoring of substantial cash from his underground activities (his partnership sold “a molded polymer coupler—a device that connects pipes that hold underground fiber optic cables—to the telecommunications industry.”). T. C. Memo. 2023-149, filed 12/13/23, at p. 2.

JT ran cash through Malaysia and Nevis (a charming island; the old sugarcane steam train ride is fun), and ultimately pled out in USDCDCO to one count of tax evasion.

Ch J TBS finds JT understated, underpaid, concealed, gave implausible and inconsistent statements, filed false returns, and pled to tax evasion, a criminal offense. Enough badges of fraud for Eagle Scout.

Section 6751(b) is the Dead Hoss.

If the injured petitioner is likely to invoke the Section 104 exclusion for personal physical injury, the wise practitioner needs to start with the demand letter. Remediation rarely succeeds. Judge Ronald L. (“Ingenuity”) Buch teaches the lesson in Kristen L. Quevy, T. C. Sum. Op. 2023-34, filed 12/12/23.

Kristen had physical and emotional problems, ran up big medical expenses, which she deducted prior to year at issue, was terminated by her employer, and sued.

“The first demand letter set forth Ms. Quevy’s potential claims ‘of discrimination and retaliation on the basis of her disabilities and requests for reasonable accommodation and wrongful termination.’ The second demand letter further elaborated on Ms. Quevy’s claims of discrimination and wrongful termination. The demand letters expressed her intent to sue for damages for wrongful termination on account of [employer]’s failure to accommodate her disabilities.” T. C. Sum. Op. 2023-34, at p. 3.

Of course, the employer’s counsel were careful to draw a broad release; every settling defendant wants to make sure that plaintiff will not be coming back.

“Under the terms of the settlement agreement, [employer] compensated Ms. Quevy for a broad release of claims, both known and unknown. The agreement characterizes the payment as ‘severance compensation.’ It was intended to ‘resolve all issues between them, including but not limited to Employee’s employment and the termination of that employment.’ The terms state that payment is ‘for [Ms. Quevy’s] alleged damages, which includes alleged injuries incident to her employment with Employer, including those related to both her purported personal injury and employment.’ Although the agreement mentions ‘personal injuries,’ nothing in the agreement indicates that it is for physical injuries. Ms. Quevy contends that [employer] was well aware that she suffered an assault in the workplace, and that it was ‘against that backdrop that they use the word personal injury.’ However, the record does not support Ms. Quevy’s reading of the agreement.” T. C. Sum. Op. 2023-34, at p. 6.

Whatever demands and settlement agreement say, Kristen deducted her medicals. So even if her emotional and physical injuries were treated by physicians, and reimbursement for those expenses thus eligible for Section 104 exclusion, Kristen didn’t clear the Section 111 tax benefit rule bar. She can’t exclude recompense for the medical expenses for which she’d previously gotten a tax benefit. And Kristen put in no evidence of eligible expenses for which she received no tax benefit.

The calculus for plaintiffs’ counsel is far from simple. And does the tax tail end up wagging the payout dog?

Apparently the trial subpoena is the new discovery cluster bomb for Dixieland Boondockers. What was previously obscure (see my blogpost “Rule 70(g)(2),” 11/7/23) is unwrapped by Judge Goeke in Halyard Holdings, LLC, Halyard Holdings Group, LLC, Tax Matters Partner, et al. 14145-21, filed 12/12/23.

A heavy-duty real estate outfit, known to provide expert witnessing for IRS, gets third-party subpoenas from Halyarders. IRS and outfit move to quash, but outfit wants legal fees. That brings in Rule 147(d)(1).

Stand back: when an unusual request is made to Judge Goeke, the requester is often deluged with somber reasoning and copious citation of precedent. And at Order, p. 4, Judge Goeke lays it on. I counted eleven (count ’em, eleven, and I did) cases cited, not one from Tax Court. The bottom line: Judge Goeke follows FRCP 45(d)(1) learning. Attorneys’ fees are permissible, but facts-and-circumstances decide how much, if any. The key is “unduly burdensome.”

“Considering the facts of these cases, we will deny [outfit]’s request for attorney’s fees. We strongly weigh the facts that petitioners proactively clarified their requests by letter… and narrowed the subpoena by letter…. We also consider the fact that [outfit] did not clearly state that it had no responsive documents for several months. Instead, [outfit] was coy about its possession of responsive documents, and it (and respondent) made arguments and statements that petitioners could take to mean that [outfit] had responsive documents in its possession.” Order, at p.4.

But don’t put the La Grande Dame on ice yet, Halyarders.

“…we have significant concerns with petitioners’ subpoenas, as we expressed to the parties during the …conference call and the … hearing. We caution practitioners before this court that the use of subpoenas as a substitute for discovery is not favored. It is not lost on us that petitioners issued subpoenas to three parties known to act as expert witnesses for respondent in cases involving syndicated conservation easements. There is a high likelihood that future use of such subpoenas (especially those involving frequent expert witnesses) as an end run around the Tax Court’s discovery rules will result in sanctions against that practitioner. The Court will not tolerate intimidation and harassment of potential expert witnesses by quietly watching these tactics become commonplace.

“We also advise practitioners before this court to avoid unclear requests in subpoenas that could reasonably be interpreted as being extremely broad.” Order, at p. 5.

My word, attorneys trying to game the system? Making end runs around Rules? Trying to push witnesses around? Perish forbid! I’m aghast!

Seriously, folks, this “win your case at discovery” business has gone far enough.

Once again, I resort to lingo of the opposable-thumbed virtuosi, they who transmit whole volumes of stuff by thumbs alone, while hanging from subway straps and holding their smartphones at impossible angles. For the traditionally-handed, that means “shaking my head.”

Paul C. Robinson, T. C. Memo. 2023-147, filed 12/11/23, has run up three (count ’em, three) years’ worth of deficiencies aggregating $41K plus the Section 6662(a) five-and-ten substantial understatement chops. Paul folds the deficiencies post-trial, but wants to contest the chops.

However,  Paul put in no evidence on the trial of substantial authority, disclosed facts and reasonable basis, or reasonable cause and good faith. And Paul files no opening brief, so is barred from filing a post-trial brief.

Judge Courtney D (“CD”) Jones had already given Paul a chance to file.

Unless the size of the deficiencies militates against negotiating (doubtful), or unless Paul played games (and a docket search reveals nothing more than ordinary pro se ineptitude), I don’t see why it needed three (count ’em, three) lawyers for IRS to deal with this case.

That’s Judge James S. (“Big Jim”) Halpern’s directive to IRS’ counsel in Michael W. Aubin and Kerry A. Aubin, Docket No.  1814-20, filed 12/11/23. This is the ongoing Australian Outback kerfuffle (no, not a burnt Bloomin’ Onion, the hush-hush Pine Gap operation) about the Section 911(a) foreign earned income exclusion for the Pine Gappers.

For the backstory, see my blogpost “Not Even His Hairdresser Knows For Sure – Part Deux,” 6/8/23.

Remember, Section 7121(b) says that a closing agreement signed by Sec’y or delegate is final and conclusive, except fraud, malfeasance, or misrepresentation, and those have been blown away here.

This is the not-unfamiliar case of the boss running out of the office, while telling a subordinate “sign this for me and send it out.”

Mr. S, the signatory upon whom IRS relied, wasn’t in the class named in the Delegation Order. But his job description might get him in under the wire.

“While ‘[t]he development of a delegation order’ is the ‘preferred method’ for effecting a delegation of authority, other forms of delegation may be permissible. See IRM 1.11.4.3 (Oct. 10, 2008). In particular ‘[p]osition descriptions and other documents that describe an official’s duties with sufficient particularity are sufficient to provide the official with the authority necessary to carry out such duties.” Id. at 1.11.4.3.(4).” Order, at p. 2. ( Footnote omitted, but it mandates a proper Delegation Order when litigation is expected).

Mr. S’ job description says he’s “responsible for planning, developing, directing, and implementing a comprehensive, Servicewide, tax treaty administration program that enhances compliance with international tax laws and tax treaties.” Idem, as my expensive colleagues would say.

Well, the US-Australia tax treaty is certainly in play here.

OK, so Mr. S is in. Except he isn’t. He never signed nuttin’. Ms. P. signed. (Names omitted).

IRS “relies on Delegation Order 1-2, IRM 1.2.40.3 (Aug. 29, 1996), which grants to ‘[a]ll supervisory officials’ the authority ‘[t]o designate acting supervisory officials in the Internal Revenue Service.” Respondent argues that Mr. S, ‘[i]n his position as Assistant Deputy Commissioner (International) . . . was a supervisory official.’” Order, at p. 3.

Not good enough for Judge Big Jim, no way.

“Even if we were to accept that Mr. S was a supervisory official, he could not have delegated to Ms. P the authority to exercise the responsibilities of his position if he had received his own authority as Acting Assistant Deputy Commissioner (International) by delegation from another supervisory official under Delegation Order 1-2. The authority granted by Delegation Order 1-2 cannot be redelegated. IRM 1.2.40.3(4) (Aug. 29, 1996). And respondent’s motion does not address the question of how Mr. S received the authority to act as the Assistant Deputy Commissioner (International).” Order, at p. 3.

Formerly, delegation orders were a fave of protesters, but they went out of style when Boss Hossery came along. Guess they’re back.

Even when it doesn’t force settlement (see my blogpost “Why I Love Summary J,” 11/13/23), summary J takes away the nonessentials, the makeweights, and the hopers that we lawyers have been trained to plead lest we overlook anything that might be construed as a winning argument.

Judge Christian N. (“Speedy”) Weiler shows us how it’s done in Jackson Crossroads LLC, Greencone Investments LLC, Tax Matters Partner et. al. Docket No. 12235-20, filed 12/8/23. Both sides move for partial summary J.

The Jacksons go 6-for-8 on their motion.

IRS first, as it’s easiest. IRS wants Boss Hossery confirmed. The Jacksons don’t fight it, and anyway this is Dixieland Boondockery Golsenized to the Elevenses, who’ve eviscerated Section 6751(b) in Kroner. IRS could Boss Hoss it tomorrow.

IRS attacks the appraisals and appraisers, and Judge Speedy Weiler finds enough facts in dispute to put these matters over for trial. Turns out the Jacksons’ companions named the wrong appraiser as being qualified in their partial summary J motion. Order, at p. 10. That’s what happens when you clone pleadings on the wordprocessor; no substitute for hand-tailoring.

Now it’s the Jacksons’ (and their companions’) turn. There was a (a) a non-cash (easement deed) contribution (b) in year at issue. IRS only claims quid pro quo, but other than the tax break IRS shows none, and Congress intended a tax break.

The interest conveyed is a qualified real property interest. That there are already 15-year Forest Land Protection Act restrictive covenants in place is irrelevant; they’re not perpetual, and will expire by their own terms.

The deed sufficiently states the conservation purposes. “Congress did not determine to incentivize only the preservation of ‘natural’ or ‘high-quality’ areas but rather to allow a charitable contribution deduction for the donation of an easement that has, as its ‘conservation purpose,’ ‘the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem.” I.R.C. §170(h)(4)(A)(ii) (emphasis added).” Order, at p. 9. The Jacksons are “relatively natural.”

Oh yes, the 501(c)(3) is OK, and the Contemporaneous Written Acknowledgment passes muster.

Again, Judge Holmes’ Oakbrook dissent is justified: try the valuation, not the peripherals.

He’s back! Immunologist James (“Little Jim”) Haber wins one, in The Diversified Group Incorporated, et al., Docket No. 17038-18L, filed 12/7/23. He’s going to get to eyeball two (count ’em, two) of three memos IRS personnel prepared in connection with review of this case. One of the three involves an unrelated taxpayer, and so Section 6103 bars production.

But the other two step beyond the bounds of deliberative privilege, and go to the process itself. I’d love to quote Judge Emin (“Eminent”) Toro’s drilldown into the underpinnings of deliberative privilege; somber reasoning and copious citation of precedent abound, worthy of being dragged-and-dropped into every practitioner’s memo of law files.

Unhappily, the Genius Baristas have posted the order in a variant of PDF such that I cannot drag-and-drop. If this were merely a disservice to me, individually, it would be worth, perhaps, a shrug of the shoulders.

But it is a disservice to practitioners generally. Courts, both State and Federal, have held again and again that the right to inspect a document must include the right to abstract and copy. I know an order is not precedent and may not be cited as authority, except in the case to which it pertains and even then only for limited purposes. But the reasoning and cases cited in support thereof should be easily available to all.

If Section 7461 has any meaning, not only should decisions, opinions, and orders be made public, but they should be made public in usable format.

How ’bout it, Judge? You told IRS to play nice. Tell the Genius Baristas to play nice.

For those keeping score at home, we have reached Docket No. 19279-23, as at 12/6/23.  At the current rate of filing, we can expect further 1500 petitions through 12/31/23. The tsunamis of previous years, when 35,000 petitions were filed in a single year, are now of interest only to historians. And of this year’s crop of 20,000 petitions, fewer than one in a hundred will result in a T. C. Memo. Barely one in 600 will feature in a T. C. Sum. Op.

So don’t be surprised, dear reader, when there are days with nothing new in United States Tax Court,

Judge Nega gives IRS summary J tossing both of his last blows, thereby bringing to an end the ten (count ’em, ten) year saga of Estate of Joseph A. Insinga, Deceased, By Amanda Gilmore, Personal Representative, Docket No. 9011-13W, filed 12/5/23. The case outlasted Fighting Joe, but his memory will be fresh in these columns, as he furnished no fewer than 18 (count ’em, 18) blogposts.

The OS bucked Fighting Joe’s materials over to Exam, which was already pursuing the targets. Fighting Joe’s stuff and a face-to-face with IRS’ sleuths only confirmed the economic substance tack they’d already taken.

“The administrative record in this case amply supports the WBO’s ultimate findings that: (1) the issues identified in petitioner’s claim were already known to the examination teams, (2) the examination teams made the same adjustments after petitioner’s claim that they were planning to make before petitioner’s claim; and (3) petitioner’s claim information did not lead to any additional adjustments being made.

“Put another way, the WBO found (and the record so supports) that the IRS did not proceed based on petitioner’s information because petitioner’s information did not substantially contribute to any IRS action.” Order, at p. 20.

I wish Judge Nega had given Fighting Joe a T. C. Memo. rather than an undesignated order. It’s a paltry send-off; his memory deserves better.