A timely filed but imperfect petition can be perfected by ratification. Judge Travis A. (“Tag”) Greaves will show you how in the obsolete TEFRA context.

Fears Drive Henry 58, LLC, Fears Drive Manager, LLC, Tax Matters Partner, Docket No. 13235-21, filed 10/5/23, rescues FDH58 from the morass, which I more particularly bounded and described in my blogpost “Ratify to Revivify,” 7/23/23.

There are three (count ’em, three) factors which, if satisfied and the judge decides to exercise case-by-case discretion, allow the defective petition to be saved. “(1) the person who attempted to file the petition thought he was authorized, and (2) those who ratified were authorized to file or approve the filing of the petition, and (3) ratification was expressly attempted or possible.” Order, at p. 2.

OK, here there’s a declaration from the manager of the defunct TMP stating he thought he was authorized, and IRS sent him the FPAA, so IRS must have thought so too. Next, a declaration from the manager of the 95.99% interest holder in FDH58 saying he would have filed, except he thought the defunct TMP had properly filed. Anyway, he agrees with everything in the petition. Finally, Rule 60(a) allows a reasonable time for ratification after the imperfection is detected, nihil obstat.

So let the petitioner tell Tax Court, IRS, and the rest of us who is the next TMP, and let the lucky contestant ratify.

Taishoff says, I repeat the warning i gave in my abovecited blogpost: “When representing an entity, make sure it still exists.” And don’t wait until the last red-hot minute to do so. With this current storm of blown-up dodges, the investors, who now claim the promoter (who is also TMP) sold them down the cliché, will use every promoter miscue in their complaint. As I said all the way back in  2011, “(T)ax matters partners are partners first, and tax matterers second.”

Thus spake 9 Cir in 1997 in support of the client-attorney privilege. I might want to suggest the clergy-penitent or even the intraspousal for that honor, but Judge Ronald L. (“Ingenuity”) Buch will let it pass, as he denies IRS’ latest attempt to pin the fraud chops on a couple als in Noel M. Parducci & Kenneth L. Parducci, et al., Docket No. 20894-19, filed 10/4/23, via a couple motions (hi, Judge Holmes). And of course the als are Crater Lake Trust and the Hoyals, making their fifth appearance on this my blog.

IRS wants to admit testimony by their trusty attorney, claiming either waiver of client-attorney or crime-fraud. Waiver occurs when the client shares privileged info (legal advice) with non-privileged persons, or makes the info public. IRS claims privilege waived when Hoyals testified in depositions about what trusty attorney did, thereby putting trusty attorney’s performance at issue.  

And privilege doesn’t exist where attorney’s advice is used to plan or further a crime or fraudulent scheme. Here there are some alleged backdated and altered documents presented at Exam.

Problem is, neither Crater Lake nor Hoyals claimed client-attorney, so until they do, IRS’ motion is denied without prejudice. And IRS hasn’t made out a case for crime-fraud.

But wait, there’s more, as the midnight telehucksters say.

IRS wants to reopen discovery to get documents relating to what the Hoyals and trusty attorney did at Exam.

Judge Ingenuity Buch isn’t having it.

“The primary issues are the parties’ liabilities for the years in issue. A related issue is the potential liability for fraud penalties. An issue often considered when determining whether a fraud penalty applies is the parties conduct during an examination. If the Commissioner has evidence of misleading statements or documents being provided during audit, he can present that evidence at trial. At this late stage of these proceedings, any incremental benefit of being able to show additional inconsistent statements is of limited value when weighed against the likely need to delay the trial of these cases that would be caused by reopening discovery.” Order, at p. 5. (Citation omitted, but get it for your files; you’ll probably be seeing a lot of it if you litigate fraud chops).

Our NY Civil Practice Law and Rules require that when a verified pleading is made, the person verifying, if other than a party, must set forth the grounds of any statement in the pleading made upon information and belief.

Judge Morrison applies this principle when it comes to FRE 201(b), judicial notice, in Edward Francis Bachner, IV, and Rebecca Gay Bachner, Docket No. 23219-15, filed 10/3/23. Ed was here before; see my blogpost “Immunity 101,” 2/17/17. I didn’t then know the scope of Ed’s concern about self-incrimination, but Judge Morrison’s thirty-one (count ’em, thirty-one) page catalogue of Ed’s doings show that Ed had good grounds for worry.

We’ve heard that phrase bandied about, with sneers and jeers aplenty, at both Stateist and Federale, but the Bench at 400 Second Street, NW, in The City of the Continued Shutdown, is certainly undeserving of any thereof.

To the contrary most explicitly, pore l’il ol’ United States Tax Court respects the strict limits set by the Congress, and strays not from the allotted narrow path.

Here’s Judge Ronald L. (“Ingenuity”) Buch once again refusing to overstep the limits.

Denis M. Curtin, et al., Docket No. 32212-15, filed 10/2/23, wants Judge Ingenuity Buch to strike down Reg. Sections 1.162-1, -7, and -8. This, Denis claims in his mislabeled Motion to Strike, because the Reg Sections violate APA and Federal Records Act.

“This Court’s jurisdiction in a deficiency case is limited to determining a deficiency. I.R.C. § 6213. Deciding an issue that is unnecessary for the purpose of determining a deficiency would merely be an advisory opinion. Courts are not in the custom of issuing advisory opinions. See Justiciability, Black’ Law Dictionary (9th ed. 2009). Mr. Curtin’s Motion fails to set forth any manner in which a ruling on the validity of Treas. Reg. § 1.162-1, -7, or -8 would affect the outcome of this case.” Order, at p. 1.

The issue is the “ordinary and necessary” deductions of around $24 million over years at issue.

“Justiciability is an umbrella term that ‘captures an amorphous set of doctrines, including standing, ripeness, mootness, and political question, that speak to limits on the decisional authority of the federal courts.’  ‘The oldest and most consistent thread in the federal law of justiciability is that federal courts will not give advisory opinions.’ Thus, we are guided by the principle of judicial administration that we do not gratuitously decide issues that do not affect the disposition of the case before us.” Order, at p. 2. (Citations omitted).

The case goes off on the statute itself, Section 162. In short, Judge Ingenuity Buch don’t need no Regulations, so whether the Regs are valid or not is unnecessary to resolving Denis’ case.

Denis’ motion is relabeled a motion for partial summary J, and denied.

Hyatt Hotels Corporation & Subsidiaries, T. C. Memo. 2023-122, filed 10/2/23, wanted to treat its reserve for free hotel stays and ancillary comps to loyalty members as trading stamps per section 451, but Judge Nega says that’s only for “cash or merchandise,” not intangibles like hotel room stays; wisely, he dodges the State law issue of license-vs-lease. So its reserve for future loyalist freebies is disallowed.

If you want to know how that loyalty program in your wallet works, this is a thorough exposition.

IRS claims that Section 481 change in accounting method allows it to hit Hyatt with a cumulative single-shot eight-figure SNOD covering the three (count ’em, three) years at issue because of Hyatt’s nonrecognition of income derived from Third Party Hotel Owners (TPHOs, who are either franchisees, or investor-owners who delegated management to others, either Hyatt or someone else) who were required to participate in the program and pay Hyatt for the privilege, but Hyatt gets to deduct for the advertising it pays.

No, says Judge Nega, hit ’em each year going forward.

“Material item” is the keyword for Section 481, and that means timing of recognition or deduction. But Hyatt’s system goes on until the program ends. When the program ends, whatever’s left goes back to the TPHOs. Note that since TPHOs come and go, whoever is last man (or woman) standing may not have kicked in all along. Nevertheless, this is a lifetime deal. That IRS didn’t apply duty of consistency each year (no deduction without recognition) this time doesn’t mean they’re barred for the future. I expect IRS to appeal this one.

Hyatt claims the payments to the fund for future redemptions is a trust fund, but Hyatt has too much command and control. Hyatt decides who does what and how, and the TPHOs have no say.

I expect other loyalty programs will come under scrutiny, and not only hotel types.

A Taishoff “Good Job, Second Class” to Hyatt’s trusty attorneys, one of whom, despite his name, was far from unlucky.

Euripedes. Haste to sustain the assault!

Dionysus. Great gods, what a number of assaults!

Aristophanes’ 405 B. C. smash hit The Frogs sums up the ongoing assaults on Section 7345, as everyone whose passport was grabbed is trying to use that enactment to get a second shot at the SNOD or NOD that set up their “seriously delinquent tax debt” ($50K or better, inflation-adjusted). This has been going on for at least four (count ’em, four) years, and I’ve blogged at least twenty (count ’em, twenty) cases.

The result is always the same: if IRS drops the certification for whatever reason, game over. The statute affords no greater, other, or further relief. Pore l’il ole Article II Tax Court can only do what Congress permits.

But the assault continues, notwithstanding.

Scott M. Fox and Rachel L. Fox, Docket No. 4663-23P, filed 9/29/23, filed MFJ for a bunch years (hi, Judge Holmes, glad to see you’re issuing a bunch SPTOs; looking forward to good blogfodder), didn’t pay, filed Ch 7, got discharged, then filed Ch 13 which got bounced. But while the 11USC§362 automatic stay was in effect in the Ch 13, IRS assessed tax for some of years at issue, and assessed tax for the remainder after the Ch 13 was bounced and stay over. IRS served NFTL, for which Scott and Rachel didn’t seek a CDP. So IRS told State to grab their passports, and Scott and Rachel petitioned the Section 7345 grab. Yes, I know the Section 7345 notice to State isn’t the grab, but it’s my shorthand.

Scott’s and Rachel’s petition claimed the assessment of taxes while the automatic stay was in effect was invalid, and therefore their debt didn’t include such taxes, add-ons, and chops.  IRS moved to dismiss for failure to state a claim.

Meantime, “… respondent filed a Motion to Dismiss on Ground of Mootness, representing that petitioners entered into an installment agreement and respondent subsequently reversed petitioners’ certification and notified the State Department of the reversal. On the same day, petitioners filed an Objection to Motion to Dismiss on Ground of Mootness, in which they again asked the Court to determine that the underlying assessments were invalid. Petitioners also asserted that they entered the installment agreement under duress.” Order, at p. 2.

Judge Travis A. (“Tag”) Greaves has this one.

“The sole relief we could grant in this case is an order directing respondent to ‘notify the Secretary of State that such certification was erroneous.’ After petitioners filed their petition, the parties entered into an installment agreement, which resulted in petitioners’ tax debt no longer being considered ‘seriously delinquent tax debt.’ As such respondent reversed the certification and notified the Secretary of State of the reversal. We do not have jurisdiction to determine the validity of the installment agreement. See Garcia, 157 T.C. at 9–10 (holding that a dispute between the parties regarding an offer-in-compromise was not properly considered in a passport case after the taxpayer’s certification was reversed). Because petitioners received all the relief the statute authorizes us to grant, we can afford them no remedy and the case is moot. See id. at 9.” Order, at p. 3.

For the Garcia story, see my blogpost “Getting the Joint,” 7/19/21.

I’ll bet Judge Tag Greaves knows how Dionysus felt.

I will make no comment here on the government shutdown. I have made plenty of comments elsewhere, but this blog remains firmly nonpartisan, although I well understand how Jeremiah felt.

Howbeit, Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan will soldier on resolutely, speaking softly and carrying TBS, keeping The Glasshouse in The City of the Endless Night up and running.

Wherefore, “(A)ll ye having business before the honorable the United States Tax Court draw near and give attention, and ye shall be heard commencing Monday, October 2, 2023.”

Here’s the scoop from the Tax Court website.

“The Tax Court will open for business as usual on Monday, October 2, 2023, and we expect to continue normal operations indefinitely. All scheduled trial sessions will proceed as scheduled. The November 8, 2023, nonattorney exam will proceed as scheduled, including all associated deadlines.”

It’s thirteen (count ’em, thirteen) years and more since I first suggested that something was less than perfect about automatic admission to practice before the United States Tax Court. “The attorney need show no proficiency in Federal practice (to say nothing of Tax Court practice), or even the vaguest acquaintance with the IRC.” See my blogpost “A Book and a Modest Proposal,” 5/22/12.

US Tax Court practice is a minefield; even the adept come a cropper. Attorneys of vast reputation in other areas of the law receive comeuppances. After more than fourteen (count ’em, fourteen) years of almost daily coverage, and 4,766 blogposts, 95% of which relate to Tax Court cases, law and practice, I cannot claim expertise.

So I feel for Mr. Hawkins, Esq., as he tries to rescue Afsaneh E. Hawkins, Docket No. 10443-20L, filed 9/28/23, his spouse. Appeals had given Afsaneh a NOD sustaining a NITL, which Afsaneh petitioned. IRS predictably moved for summary J after an attempt by Afsaneh to get an OIC failed.

“…the day answering briefs were due, we got a motion to continue for one day from Ms. Hawkins. [The next day], we got a motion to continue more generally in a document signed by Mr. Hawkins who, though a lawyer, is not admitted to practice in Tax Court. Accompanying this was a contract that he had signed back in 2020 with a firm that is not a law firm but calls itself ‘American Tax Solutions.'” Order, at p. 1.

Maybe Mr. H, Esq., was going to try for another OIC; sounds like one of those midnight television commercials pitching “get rid of your tax debt,” but rather gets rid of your money, but I can’t tell.

But that’s beside the point. The general idea is, when you get a summary J motion, you answer it. At least in Judge Mark V (“Vittorio Emanuele”) Holmes’ courtroom.

“This suggested that there was some confusion on the part of the Hawkins as to what we were requiring. We spoke with them … to try to clarify that all we need is a response to the IRS’s motion that we can also consider Ms. Hawkins’ own motion. We also explained to Mr. Hawkins that, until and unless he becomes a member of the Tax Court bar, he may not file anything on his wife’s behalf.” Order, at p. 1.

I am sure Judge Holmes told Mr H, Esq., that fifty Georges, a certificate of good standing, no more than 90 days old, from any Rule 200 Court to which he is admitted, and a completed application form (Form 30, nowhere to be found on the Court’s website, but here’s a link) would get him admitted.

So Judge Holmes resets the briefing schedule, seriatim instead of simultaneous.

Two words to Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan: Automatic admission is a mistake. And please put Form 30 on the website.

Even STJ Diana L. (“Sidewalks of New York”) Leyden, in her Zoomiegram today, counseled pro bonos and LITCs that utmost diligence when reviewing figures after settling a case may not be enough. She suggested getting a CPA or an EA to doublecheck the numbers, as even IRS gets it wrong, and “Lawyers can’t add.”

Proof positive comes from her colleague STJ Peter (“Headbanger”) Panuthos in Raymond S. Edwards, T. C. Sum. Op. 2023-29, filed 9/27/23. Ray failed to file a year’s worth of FICA/FUTA/ITW, as he kept paying his personnel while his daycare operation’s license was suspended. Ray is fighting over add-ons (late filing, late paying), and how IRS applied his payment to include add-ons, when he directed his payment be applied to tax only.

Ray’s excuses that IRS was late with the PIN he needed to set up his EFTPS account, and he had to pay his personnel to keep from losing them even though he made no money, don’t get it.

But for one quarter, IRS claims late filing, but the SO’s notes shows he did timely file. “On the basis of respondent’s own records and notes, we are not satisfied petitioner was correctly assessed an addition to tax for failure to timely file his Form 941 for the period ending March 31, 2015.” T. C. Sum. Op. 2023-29, at p. 7. Everything else is sustained.

But IRS did misapply Ray’s payment. However, rather than unscramble that frittata, STJ Panuthos merely notes that an appropriate order and decision will be entered.

Word to Ray and his trusty financial consultant (and everybody else): Triple check that order and decision.

It takes Judge Goeke 31 (count ’em, 31) pages to decide that Organic Cannabis Foundation, LLC,, 161 T. C. 4, filed  9/27/23, is entitled to equitable tolling on its Letter 12153 for Year Three of the Section 6320 NFTLs it got.

For the backstory, see my blogpost “Roll On, Silt, Roll On,” 11/14/22.

Section 6320(a)(3)(B) doesn’t bar Appeals from hearing a late-filed Letter 12153 request for a CDP. Legislative history, the intent, purpose, and language of the statute are gone over in depth, and Boechler, P. C., gets a real workout.

But at close of play, “Taxpayers must pursue a CDP hearing before they can seek judicial review. A categorical prohibition of equitable tolling of the filing deadline for Appeals’ review of collection actions would be contrary to Congressional intent. It would mean that we would protect a taxpayer’s ability to seek judicial review through equitable tolling of the section 6330(d) deadline for filing a petition while denying taxpayers the possibility of equitable tolling to obtain Appeals’ review and a determination for this Court to review. Although the Supreme Court did not address the 30-day period for requesting a CDP hearing in Boechler, we will not apply a stricter standard to the administrative filing deadline. Congress allowed for equitable tolling of the judicial filing deadline in section 6330(d)(1). Boechler, P.C. v. Commissioner, 142 S. Ct. at 1500–01. It would not have intended to place a separate procedural obstacle to access this Court by precluding tolling of the 30-day period for requesting a CDP hearing.” 161 T. C. 4, at p. 30.

Judges Kerrigan, Gale, Paris, Morrison, Nega, Pugh, Ashford, Urda, Copeland, Toro, Greaves, Marshall, and Weiler, are OK with this.

Judge Courtney D (“CD”) Jones agrees that Appeals can hold the CDP on a late Letter 12153 if equitable considerations so dictate, but dissents as to Reg. Section § 301.6320-1. The majority says the Reg doesn’t bar equitable tolling of the thirty-day period to petition from a NOD. Judge CD Jones says the statute is ambiguous, so she wants a Chevron part two analysis whether the Reg falls foul of the statute. The majority breezes past the Reg.

Judges Foley and Buch agree.

Time for a trip to 9 Cir, and beyond?