Section 6751(b) Boss Hossery, at least in its classic form as the ABA Tax Section persuaded Congress to enact it in 1998, is well on its way to the glue factory. 9 Cir and 11 Cir have digested the dictionary chaw of ex-Ch Judge Michael B. (“Iron Mike”) Thornton, and held that the Boss Hoss can sign off whenever, as long as s/he is still Boss Hoss pre-assessment, even if dragged bodily from his/her retirement party to sign off on chops litigated to the Supreme Court years before.

But Judge Patrick J (“Scholar Pat”) Urda removes Boss Hossery to an even higher level, with a dictionary nibble at our old lexicographical canapé “or,” in Rock Bottom BBS, LLC, Barnett Properties, Tax Matters Partner, Docket No. 9145-21, filed 11/3/23.

No doubt their immediate supe, while still immediate supe, signed off on the chops the co-RA examiners recommended at LB&I, before word thereof ever got to the Rockers. IRS didn’t play the usual partial summary J move to nail this down.

But with a little more than one week to go before trial, the Rockers’ trusty attorneys try for summary J, with the following.

“During all times pertinent to the resolution of the pending motion, a provision in the Internal Revenue Manual (IRM) relating to LB&I stated that, ‘[f]or a tax shelter case involving a listed transaction, the decision to impose or not impose an accuracy-related penalty must be approved by the respective Director of Field Operations (DFO).” I.R.M. 20.1.5.2.1(3) (Apr. 22, 2019). In November 2020, the DFOs for the Eastern Compliance and Enterprise Activities Practice Areas issued a blanket approval ‘of the assertion or non-assertion of accuracy-related penalties under IRM 20.1.5.2.1(3)’ for conservation easement cases assigned to LB&I, noting (1) that no such requirement applied to ‘virtually identical’ conservation easement cases assigned to other IRS divisions, (2) the need to treat similarly situated taxpayers the same, and (3) the highly coordinated nature of such cases. [Doc. 56 at 13–14.].” Order, at p. 2 (Footnote omitted, but it says IRS subsequently struck this from the IRM; I wonder why).

The Rockers point out that the section 6751(b)(1) contemplates approval “by the immediate supervisor . . . or such higher level official as the Secretary may designate,” and argues that the IRM’s DFO approval requirements represents a delegation of the authority by the Commissioner that displaces the immediate supe.

Judge Scholar Pat has oodles of reasons (a favorite phrase; see my blogpost “Oodles of Cases, 6/16/23, and “More Virgins, More ‘Oodles’,” 6/20/23) why to deny their motion for partial summary J.

“This argument is wrong for any number of reasons that we will not go into given that trial begins in little more than a week. Suffice to say that the word ‘or’ as used in section 6751(b) permits approval by either of two types of officials, and the requirement here was satisfied by SRA M’s written sign-off as the immediate supervisor.” Order, at p. 3. (Citations, name, and footnote omitted).

Omitted footnote says trusty attorneys haven’t shown any statutory context why “or” isn’t disjunctive, and anyway, IRM confers no rights on petitioners and doesn’t have the force of law.

Besides, the now-discarded Boss Hossblanket is just fine.

So Taishoff asks, why bother with Boss Hossery at all? Why not a general Boss Hossblanket for every chop of every kind everywhere, whenever?

It’s been a long long trail a’windin’, but we’ve come to the end of the road in Estate of Andrew J. McKelvey, Deceased, Bradford G. Peters, Executor, 161 T. C. 9, filed 11/2/23. Almost three (count ’em, three) years to the day since 2 Cir sent the founder of the fleshpeddling website Monster.com back to Tax Court to reckon up the tax bill for the busted variable prepaid forward contracts (VPFCs) wherewith the late Andrew sought to get a DOD stepped-up basis for his estate. For the backstory, see my blogpost “Monster Forward Shot Blocked,” 10/31/19.

Judge Alina I. (“AIM”) Marshall appears in relief of retired Judge Ruwe. First, the old VPFCs are closed, not open. Thus spake 2 Cir. Thus one can determine both the character of the capital gain (short or long), and the amount thereof. Stock prices fluctuate, so Brad’s trusty attorneys’ arguments about real estate option contracts are wide of the mark; real estate doesn’t fluctuate much (Taishoff says except Dixieland Boondocks). Section 1234 and its appendages come into play.

“The nature of the underlying property controls. Even when it is well established that the taxpayer’s position with respect to a derivative is not property, the Code dictates that any gain or loss is treated as if derived from property. We will continue to evenly apply that principle to the VPFCs in question. Consequently, the applicability of section 1001(a) is not affected by the nonproperty nature of decedent’s position with respect to the VPFCs, but rather by the fact that the underlying shares are property. The underlying Monster shares are property in the hands of decedent, and therefore section 1001(a) applies to gain from the sale or other disposition of derivatives relating to those shares. Where section 1001 restricts gain calculations, either to property or otherwise, we will look to the nature of the underlying shares as a basis for the section’s applicability, rather than to the nature of the taxpayer’s position.” 161 T. C. 9, at p. 21.

And Judge AIM Marshall lays it all out on page 22.

Short-term gain of $71 million in 2008. The interest will be more than that.

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

Ex-Ch J Foley dissents, not quite so colorfully,  expressing his disagreement with Hallmark Collective and desiring to extend Boechler, P. C. to deficiency cases in Tiffany Lashun Sanders, 161 T. C. 8, filed 11/2/23. Judge Christian N. (“Speedy”) Weiler joins him. The language of Section 6213(a) is insufficiently clear that the 90-day cutoff is sufficiently disciplined for the Supremes.

Tiffany was a couple days (hi, Judge Holmes) late with her petition from a SNOD, and is willing to drop the case, but Tiffany is from MD, which is in 4 Cir, and 4 Cir hasn’t said anything yet.

Judge Nega has this one, and there’s plenty about 3 Cir in Culp, which failed to find sufficient nexus between jurisdiction and the 90-day cutoff in Section 6213(a). But Judge Nega and the majority hang their hats on the prior construction canon, not stare decisis alone. Prior construction seems to be what Shaw put in Saint Joan’s mouth. Hence Judge Gustafson’s lengthy historical excursus in Hallmark Collective and the majority’s intention to follow their own honest beliefs until the Supremes tell them “no” decide the case. Tiffany is auf’d.

Ch J Kerrigan, Jj Buch, Pugh, Ashford, Urda, Copeland, Toro, Greaves, and Marshall are on board with this.

Judge Courtney D. (“CD”) Jones concurs in result, and Judge Ronald L. (“Ingenuity”) Buch unloads seven (count ’em, seven) pages of somber reasoning and copious citation of precedent concurring, to quell ex-Ch J Foley’s argument, with which all the majority agree. You be the judge who has the better argument.

Taishoff says that while Judge Buch has much to say about Section 7459(d) preclusion in bankruptcy, neither he nor anyone else has addressed the issue of the automatic stay in Section 6213(a), which prevents collection or enforcement while a proceeding is pending, or could be pending. The 90-day cutoff could run, IRS start collecting, then the petition be retroactively resuscitated, then dismissed, and then born again on an appeal. Chaotic result.

Fresh off admonishing IRS’ counsel to tidy up their exhibits (see my blogpost “Obliging? He’ll Unscramble Your Papers,” 11/1/23), Judge David Gustafson delivers a sermonette on “the bedrock of Tax Court practice,” stipulations.

And while the title hereof is the gist thereof, Judge Gustafson’s words are worth repeating.

“To state a truism, if facts are not disputed, then they should be stipulated. We acknowledge that a certain modest amount of horse-trading goes on in the stipulation process, but it is not permissible for a party to hold undisputed facts hostage to force the other party to stipulate other facts. Likewise, while Rule 91(a)(2) directs that stipulations be ‘comprehensive’, it is also not permissible for a party to refuse to stipulate until he believes that the stipulation is comprehensive enough. Multiple stipulations can be filed in a single case. It often makes sense to stipulate first the low-hanging fruit and to keep working on the more difficult matters. Authenticity of documents is often a relatively easy matter for stipulation; and the significance of those documents may later be agreed upon in a subsequent stipulation–or, if not, that significance may be a subject of trial.” Order, at p. 2.

And, of course, don’t capitulate.

The case is Marc Forschino, Docket No. 13967-22, filed 11/2/23.

How many times before now have I complimented Judge David Gustafson for his obliging nature. He’ll visit you in the slammer to try your case, hunt you down if you go MIA, correct your papers (but not do your research for you), give you a new hearing if you have any evidence, do everything short of bringing coffee and Krispy Kremes to calendar call and feeding the parking meter while you wait.

When IRS’ counsel get themselves imbrangled with exhibits and objections to introduction thereof in Marc Forschino, Docket No. 13967-22, filed 11/1/23, Judge Gustafson refrains from tossing IRS’ Rule 91(f)(1) OSC because of the whiteness of the shoes of Marc’s trusty attorneys (and they are the first team of a heavy-duty whiteshoe).

But he does admonish IRS’ counsel to play nice. By the book.

“In the experience of the judge signing this order, stipulations of fact filed in the Tax Court that include exhibits do sometimes relegate to the preamble general assertions about the exhibits (sometimes addressing authenticity, admissibility, and reservation of objections). However, exhibits are generally identified in paragraphs to the stipulation; and this practice facilitates the stipulation process by giving an occasion for the responding party to note an objection or propose a revision by reference to a paragraph number. We think that this general practice accords with Rule 91(b) (‘The stipulation must be clear and concise’) and Rule 91(f)(1)(A) (‘The motion must: (A) identify with particularity and by separately numbered paragraphs each matter that is claimed for stipulation’) better than referring to only some but not all of the exhibits in numbered paragraphs of the proposed stipulation. We think that petitioner’s counsel is capable of responding to the motion despite its imperfections; and therefore we will not vacate our order, strike the motion, and require the Commissioner to start over; but we do ask that, in future filings, counsel follow the instructions given here.”

So, IRS’ counsel, file a supplement to this motion for an order to show cause, to include copies of the exhibits. And Marc’s trusty attorneys can deal with the preamble in their reply.

Taishoff says Judge Gustafson uncharacteristically gave said trusty attorneys only a week to do so. Maybe they are capable of tossing off the reply “and for a hundred visions and revisions, Before the taking of a toast and tea,” but it seems a bit short, coming from an obliging jurist.

Not since Judge Christian N. (“Speedy”) Weiler first appeared in this my blog (see my blogpost “Speedy Is As Speedy Does,” 9/10/20) has there been a debut like that of STJ Zachary S. (“Highrise”) Fried. He hears a motion, decides it, and fires off his first order in Bobby Lee Williams, Docket No. 8450-18SL, filed 10/31/23, all on one day.

An auspicious start.

The song to which the title of this blogpost refers was written when i was a mere babe, but it sums up my feeling when I read Nicole Diane Henaire, T. C. Memo. 2023-131, filed 10/30/23. In fact, the arguments Nicole raised were a virtual echo of those raised by Mike Aubin in my blogpost “Not Even His Hairdresser Knows For Sure – Part Deux,” 6/8/23, and meet a like fate at the hands of Judge James S. (“Big Jim”) Halpern.

And so does Kevin F. Long, T. C. Memo. 2023-130, filed 10/30/23, who got only two (count ’em, two) days to come up with a proposed IA after the Offer Examiner bounced his OIC, and the SO at the CDP that followed volleyed back-and-forths with Kevin, giving him not fewer than seven (count ’em, seven) days to answer each volley.

Then, when the SO was off-duty teaching and then on vacay, Kevin heard nothing, so he sent a follow-up letter. The SO replied “Let me know if you want to set up a time to discuss,” and two (count ’em, two) days later closed the file and issued a NOD.

You can imagine how Judge David Gustafson deals with this. Or you can read the opinion.

Remember my blogpost “Slow Down, You Move Too Fast,” 9/24/13? Same story.

I reserve the “Scrapbook” blogpost title for Tax Court matters not themselves blogworthy, but of more interest than a mere glance.

Two entries for the “Pigs Git Fed, Hogs Git Et” sweepstakes lead off.

My colleague Peter Reilly, CPA, striving to get down to the end of the North American mainland on Thanksgiving Day to see his alma mater (and that of Judge Albert G (“Scholar Al”) Lauber, and my nephew Jim) play the 100th in a historic series, asked me to deputize (alas, I cannot). In addition, he asked me to comment upon Mill Road 36 Henry, LLC, MR36 Manager, LLC, Tax Matters Partner, T. C. Memo. 2023-129, filed 10/26/23. That same day the Kraske opinion came down, which I thought much more worthy of comment than another Dixieland Boondockery overvaluation case, even one where land bought at $28K per acre suddenly was worth $280K per acre when syndicated. Check out my blogpost “Beating the Dead (Boss) Hoss,” 10/26/23, and see if you agree. Boss Hossery has far wider application than overvalued syndicated easements. Anyway, the trade press has picked up the Mill Road case, so I’d be fishing behind the net.

Next entry, Andrew L. Harrell and Katherine L. Harrell, T. C. Sum. Op. 2023-31, filed 10/30/23. It’s Andy’s story. He’s a transportation manager for several outfits, attending transportation expos around the country to find new vehicles for his employers. He also has a 2017 unreimbursed business expenses case, the last of that crop until 2026 and beyond. Problem is, he deducted 50% of his gross, with minimal documentation and no explanation of his employers’ reimbursement policies. IRS conceded chops at trial, but with no explanation therefor I can only guess that Andy has an engaging personality.

To conclude, Alan Michael Berkun, Docket No. 22550-17, filed 10/30/23, is back, after only one week’s pause, with an oldie-but-whatever, a rerun of Battat. For those tuning in late, see my blogpost “Necessity Knows No Law,” 2/6/17. Judge Patrick J (“Scholar Pat”) Urda sends off this time-worn argument, remarking “(G)iven the venerable age of this case, the Court will plan to hold trial in late 2024 or the first half of 2025.”

“Venerable,” Judge? In Tax Court chronology, six (count ’em, six) years isn’t even a wrinkle in time. We saw the end of the late Pearl Kalikow estate story last week, with its 2010 docket number, and that can’t be the longest running show at The Glasshouse.

Maybe the Ch J might adopt our State court procedure, whereby an administrative judge cracks the whip, requiring explanations why antiques are still in the shop, and bestirring the dilatory to stop dancing in the backfield, and move the football or eat the football.

Or, How to Be A Privileged Character

Judge Albert G. (“Scholar Al”) Lauber gives a nutshell version of client-attorney privilege in Robert Knudsen and Estate of Sharon Knudsen, Deceased, Charles W. Buchta, Executor, 18290-18, filed 10/27/23. This is another micro-captive offshore insurance blow-up, with both parties seeking communications from the Knudsens’ erstwhile attorney, whom I’ll call Arizona.

The Knudsens’ current trusty attorneys (as the late Sharon wanted innocent spousery, her estate quite rightly has separate counsel from Bob) and IRS jointly want a SDT, ordering Arizona to pony up engagement letters (what we State courtiers call “retainer agreements”), POAs, and anything else authorizing Arizona to represent either the late Sharon (before she became the late Sharon) and Bob.  Likewise, they want anything showing commission splits and consulting fees that Arizona or entities he controlled got out of the deals.

The Knudsens’ current trusty attorneys are a canny lot. “When issuing their subpoenas, petitioners did not waive the attorney-client or work product privileges, but retained the right to assert privilege with respect to any documents produced by Mr. [Arizona].” Order, at p. 1., footnote 2.

Arizona shows for a document production hearing, and claims client-attorney, so hands over nada.

Judge Scholar Al says that when a client (present or former) asks, the attorney must hand over everything. But this is a joint subpoena, and client-attorney is specifically invoked. So how does IRS get into the act?

Trust Judge Scholar Al.

“When Mr. [Arizona] produces the requested documents to petitioners, they shall immediately produce those documents to respondent’s counsel. If petitioners seek to withhold from respondent any documents produced by Mr. [Arizona], they shall supply a privilege log setting forth the justification for any and all claims of privilege.” Order, at p. 2. That’s document by document, specifying each element of the privilege invoked, and the facts supporting each thereof.

Remember guys, “…to the extent Mr. [Arizona] served petitioners as a business or financial advisor, as opposed to an attorney supplying legal advice, the attorney-client privilege is simply irrelevant.” Order, at p. 2. (Citation omitted).

If IRS thinks they’re being shortchanged, they can move to enforce their part of the joint SDT to get what isn’t privileged.

Practice tip: If you hand over a majority of, or all, files at client’s request, scan ’em, and keep on separate harddrive, off-campus and off-network (chain of custody, y’know). Harddrives are cheap, paper copies are wasteful. Maybe so might come in handy if you get The Phone Call.

Once again, the sloppy drafting of Section 6751(b) and the statute’s mechanical application by Circuit Courts of Appeals utterly eviscerate the protection sought in 1998 against IRS juniors using the threat of penalties to beat up taxpayers and obtain unjustified settlements.

True, Wolfgang Frederick Kraske, 161 T. C. 7, filed 10/26/23, loses his companion case, T. C. Memo. 2023-128, filed 10/26/23, a “goofy regulation” Reg. Section 1.183-2(b) case. I won’t blog it, because it’s the usual fact-specific trudge. Wolfgang wasn’t having fun, but he was losing money and burying a lot of his other income.

Wolfgang first tried for Appeals, but missed the 15-day cutoff. His request for Appeals did get to SBSE while the tax compliance officer who issued the 15-day letter (asserting the five-and-ten substantial understatement chops) was still supervised by the same group manager. But the GM OK’d the chops just before Wolfgang’s Appeals request got there. Wolfgang got to Appeals, but lost, got a SNOD and petitioned. He claims Section 6751(b) was violated by the 15-day letter.

Judge Gale says “Not in 9 Cir post Laidlaw.” Ol’ Bill Wise lost Laidlaw’s Harley Davidson Sales, Inc. v. Commissioner, 29 F.4th 1066, 1071 (9th Cir. 2022), rev’g and remanding 154 T.C. 68 (2020).

Wherefore Golsen, to which Judge Gale pays extensive obeisance, applies, extending the holding in Laidlaw from assessibles  to nonassessables (deficiency cases) here. As long as the supervisor was still immediate and assessment (a ministerial act after all administrative and judicial resolution, or possibility thereof, has been exhausted; see Sections 6213(a) and 7481)) not yet made, the 9 Cir rule is “whenever.”

“As previously noted, the Ninth Circuit summarized its holding in Laidlaw’s Harley Davidson in broad terms: ‘[W]e hold that § 6751(b) requires written supervisory approval before the assessment of the penalty or, if earlier, before the relevant supervisor loses discretion whether to approve the penalty assessment.” By its terms, the holding is not confined to assessable penalties, and the Ninth Circuit’s discussion makes clear that it had in mind penalties subject to deficiency procedures when it added the qualifier that a supervisor must have had discretion to approve when acting to do so. Thus, nothing in the Ninth Circuit’s holding or analysis suggests that it might think a timing rule different from its ‘retention of discretion’ rule would apply in the case of penalties subject to deficiency procedures.” 161 T. C. 7, at p. 7. (Citation omitted).

And Golsen says there’s no point in Tax Court’s going contrary to a clear CCA case, only to be reversed.

Unless the Supremes or Congress rescues the Boss Hoss (some hopes!), the statute is a joke.