“Can’t anyone here play this game?”

Commenter in chief, Bob Kamman sent another order stricken by the Tax Court offering another chance for a lesson in what not to do.  He also offered the title of today’s post as he quoted from a beloved baseball manager of yesteryear, Casey Stengel.  The Tax Court had calendared the case of Sneider-Pedon v. Commissioner, Dk. No. 33172-21 resulting in an order from the assigned trial judge rather than the Chief Judge.

Petitioner here sought relief from the denial of innocent spouse relief but as the order indicates, she attached a notice of determination for only one of the years she mentions in her petition.  This causes problems at the case resolution stage and points out again that the Court pays careful attention to the documents giving the Court jurisdiction and the document resolving the case.


In response to a proposed decision document, the Court entered the following order:


Docket No. 33172-21. 

ORDER This case was called from the calendar for the Trial Session of the Court at Cleveland, Ohio on November 7, 2022. In the Petition, filed October 18, 2021, petitioner disputed respondent’s denial of relief from joint and several liability under section 6015 for tax years 2012 and 2013. However, petitioner attached the Notice of Determination only for tax year 2013, not for tax year 2012. Neither party has since remedied this omission, so we remain unsure whether petitioner’s claims regarding tax year 2012 are validly at issue in this case. On November 4, 2022, respondent filed a Status Report to inform the Court that a basis for settlement had been reached. On November 7, 2022, the parties filed a Settlement Stipulation and a Proposed Stipulated Decision. The Settlement Stipulation contains petitioner’s Statement of Account (Form 3623) for tax years 2012 and 2013, prior to any relief that she may be granted under section 6015. The Proposed Stipulated Decision proposes to remove petitioner’s “deficiency” for tax years 2012 and 2013 and to find an overpayment for tax year 2012. The Petition requests declaratory relief under section 6015, not a redetermination of deficiency. Indeed, there is no notice of deficiency before us in this case. Therefore, any proposed stipulated decision must refer to “relief from liability,” not to a reduction of deficiency. 

Accordingly, we will strike the Proposed Stipulated Decision and give the parties 30 days to file a corrected proposed stipulated decision that conforms to the relief requested in the Petition. Upon due consideration, and for cause, it is 

ORDERED that this case is continued and that jurisdiction is retained by this Division of the Court. It is further  

ORDERED that the parties file a status report by December 19, 2022, containing petitioner’s Notice of Determination for tax year 2012. It is further 

ORDERED that the parties’ Proposed Stipulated Decision, filed on November 7, 2022, is hereby stricken from the record. It is further 

ORDERED that by December 19, 2022, the parties file a corrected proposed stipulated decision that conforms to the relief requested in the Petition. 

Petitioner in this case filed her petition pro se.  That almost always means that the Chief Counsel attorney prepared the decision document.  Here, the decision document includes a year for which the Court cannot be certain that it has the ability to render a decision.  Without the ticket to Tax Court, here a notice of determination, the Court lacks the ability to confirm that petitioner has properly invoked its jurisdiction. 

It’s not unusual for a petitioner to fail to attach the document serving as the ticket to Tax Court.  If petitioner fails to attach that document, it falls to Chief Counsel attorney to file the document or move to dismiss.  Here, petitioner included an appropriate determination for one year but not the other.  No one raised an issue concerning the dissonance between the years listed in the petition and the year reflected on the decision document until the Court challenged the document.  Overlooking this dissonance is fairly easy but should be on a checklist the Chief Counsel attorney would have in preparing the answer and the reviewer should have in reviewing the answer.  So, something fell down in the Chief Counsel office.

The second mistake reflects a deeper problem because it suggests that the Chief Counsel attorney did not understand the nature of the case.  Because petitioner pursued the case pro se, she would not be expected to understand the difference between a deficiency and a determination.  The same cannot be said for the attorneys in Chief Counsel’s office.  The document presented to the Court would have been prepared by Chief Counsel’s office which has access to templates covering this situation.  Perhaps the language of deficiency versus relief from liability merely reflects a failure to select the proper template for use in preparing the document but it also reflects either a more fundamental misunderstanding of the different types of innocent spouse cases or the nature of innocent spouse cases.  Some type of additional training seems in order but perhaps that training has come in the form of a public rebuke from the Court in rejecting the proposed document.

Chief Counsel has been hiring lots of new attorneys.  It takes some time to understand the nuances of the practice which is why every document that goes out the door gets reviewed by a manager in that office.  Here, the failed document appears to result from a docket attorney that may not have understood exactly what was at issue and a review that did not take the time to check the determination passing that task along to the judge who had to provide feedback in a public manner.

The posts on bloopers results not from any empirical study suggesting that Chief Counsel’s office makes more mistakes now than in the past.  I can attest that it made plenty of these kinds of mistakes when I worked there both as an attorney and as a manager.  Hopefully, we can continue to learn from them.  As I have written in prior posts I had my fair share of painful bloopers over the years.

Deemed Stricken

Commenter in chief, Bob Kamman, recently alerted us again to orders from the Tax Court in which the Court rejects the filings by the parties because of mistakes in the filings.  This is not the first time he has noticed mistakes in filing documents at the Tax Court.  I wrote a pair of posts, here and here, about mistakes Bob identified last year.

As I mentioned in one of the prior posts, at Chief Counsel’s office the Procedure and Administration Division of the National Office, and its predecessor the Tax Court Division, kept track of Tax Court bounces when I worked there.  Bounces were not a good thing since they signified that the local office had made a mistake in filing a document with the Court.  Not only did the national office let you know when a bounce occurred, but whenever there were intra-Chief Counsel office CLE programs, the speaker from the national office would present a 10-15 minute monologue describing the bloopers produced by the field offices over the past year or so.

The mistaken filings often involve matters filed by both the Chief Counsel’s office and the petitioner (or petitioner’s counsel).  It’s possible to see some of these bloopers by following the Court orders.  Bob found them using a search in the orders for “deemed stricken.”  I will talk about one order in this post and occasionally come back to these types of orders as we identify them.  These orders usually provide a lesson on what not to do in a case.  Those lessons, while generally painful, can be useful.


The case I will discuss today involves a proposed decision document.  The Court rejects the document.  In this blog we sometimes criticize the Court for the slowness with which it delivers opinions, but it’s easy to forget that the judges have many tasks which they must perform with care.  While they rely on the litigants to assist them, they must constantly check behind the litigants to make sure that even where the litigants agree, the matter presented is correct.  Chief Judge Kerrigan found that the agreed decision document the parties requested she sign did not reach her desk with the appropriate background.  Here is the order:




Docket No. 12604-22 


On November 21, 2022, the parties filed a Proposed Stipulated Decision for the Court’s consideration. However the deficiency proposed therein for the 2018 taxable year, $5,173.00, is more than the deficiency determined for that year in the Notice of Deficiency, $3,449.00. Respondent did not assert an increased deficiency in the Answer and nothing below the line in the Proposed Stipulated Decision accounts for the increase. Accordingly, the Court is unable to process the parties’ Proposed Stipulated Decision.

For cause, it is

ORDERED that the Proposed Stipulated Decision, filed November 21, 2022, is hereby deemed stricken from the Court’s record in this case. It is further

ORDERED that the parties shall, on or before December 20, 2022, file a revised Proposed Stipulated Decision.

The Gaddie case, like 75% of the Tax Court’s cases, was filed pro se.  She filed her petition on June 6, 2022 and the Chief Counsel attorney filed an answer on June 23, 2022.  That is amazingly quick for an answer reflecting that the Tax Court had solved it delays in providing petitions to the IRS and that the attorney or paralegal in the Dallas office of Chief Counsel assigned to the case was on top of their docket.  The next entry in the case is the proposed stipulated decision.  The docket sheet indicates that the proposed stipulated decision was filed on November 21, 2022 as stated in the order copied above. 

The order striking the document from the record was entered just two days later which means the order received a very quick review.  Since the case had not yet appeared on a calendar, I would have expected the case to be in the general docket of the Court unassigned to a specific judge; however, the order here was entered by Chief Judge Kerrigan as mentioned above.  Perhaps decision documents get assigned out of the general docket.  I do not know whether the mistake here was detected by someone in the records section of the Court, the Chief Judge’s staff, or the judge.  Someone, however, paid close attention to the document filed and the notice of deficiency.

The order points out that the IRS seeks to obtain a larger assessment against Ms. Gaddie than the IRS put into the notice of deficiency.  One of the dangers of filing a Tax Court petition is that the filing places the case in the hands of a Chief Counsel attorney who may notice mistakes on the return that the auditors did not notice.  While the Independent Office of Appeals has a policy of not raising new issues which would increase the amount of the deficiency, the Office of Chief Counsel does not have such a policy and regularly seeks increased deficiencies if it identifies a mistake.  In the Tax Court case the IRS can seek an increased deficiency.  For this reason, before filing a petition you must think about the possible downsides as well as the upsides. 

While the proposed stipulated decision would not typically discuss the reason for an increased deficiency, this proposed stipulated decision clearly creates an increased deficiency.  The Court notes the increase but strikes the document because the IRS never asked for the increase.  The IRS needed to ask for the increase in the answer or in an amendment to the answer if it wanted to recover an amount in excess of the deficiency listed in the notice of deficiency.  I cannot see the answer without taking steps I am unwilling to do for purposes of this post, but I can see from the docket sheet that the IRS did not file an amendment to the answer.  I assume that in the answer it so quickly filed in this case it did not seek to recover additional amounts of tax above the amounts listed in the notice of deficiency.

The Court also knows that because Ms. Gaddie is pro se she may not have an appreciation for what the IRS should do if it wants to obtain an increase in the deficiency it set forth in the notice of deficiency.  Striking the proposed stipulated decision now places the IRS in a position of filing a new document seeking a decision in an amount equal to or less than the amount in the notice of deficiency or filing a motion seeking permission to amend its answer.  In the motion it will need to explain the reason for the increased deficiency and Ms. Gaddie will have the opportunity to agree or oppose the motion.  The Court will have the opportunity to know that Ms. Gaddie understands the increased amount and the Court will have the ability to satisfy itself that the amount listed in the proposed stipulated decision is not a typo or mistake of another kind.

It’s great that the Court looks out for these types of mistakes.  The order here provides a lesson to the Chief Counsel docket attorney on how to obtain an increased deficiency and the care with which a stipulated decision must be drafted.  We get the opportunity to observe what appears to be a blooper and to be thankful for the care and time the Court devotes to making sure that cases before it end correctly.

Tax Court Issues Another 17-0 Ruling Regarding The Jurisdictional Nature Of Filing A Tax Court Petition

Today the Tax Court ruled in Hallmark v. Commissioner, 159 T.C. No. 6 (2022) that the time period for filing a petition in a deficiency case is jurisdictional.  The Court relies heavily on history and on 7459.  We will write more as we digest the full opinion but once again the Court does not find Supreme Court case law regarding jurisdiction, including the recent decision in Boechler, to deter it from the conclusion that the time period for filing a petition is jurisdictional.  The decision will no doubt set off litigation in the circuit courts around the country and may lead again to a decision by the Supreme Court which last time reversed the 17-0 decision of the Tax Court in Guralnik v. Commissioner with a 9-0 decision in Boechler.

Suspending the CSED by Pursuing Litigation or Is This the Final Stop for the Weiss Case?

We have written about the Weiss case on several previous occasions as it wound its way to the Supreme Court and then started anew in the Tax Court.  You can find those posts here with links in the first sentence of that post to the prior three posts on the cases and appeals brought by Mr. Weiss regarding the calculation of the collection statute of limitations.  I write today to briefly discuss the Third Circuit’s affirmance of the District Court for the Eastern District of Pennsylvania’s most recent decision.  Of course, it’s possible that Mr. Weiss will want to try again to go to the Supreme Court.  The government is collecting filing fees from him if not taxes.

The issue here is the effect of the appeal to the Supreme Court in his first stream of litigation, in which he was arguing about whether he made a Collection Due Process (CDP) request, on the statute of limitations on collection.


The IRS brought a collection suit against Mr. Weiss at the last minute before the statute of limitations on collection expired for the year at issue.  Mr. Weiss argues in his defense against the collection suit that the statute of limitations expired prior to the time of the filing of the collection suit.  He to convince the district court that the IRS improperly calculated the statute of limitations just as he failed in the first round of litigation to show that he had not made a CDP request.  His frustration is no doubt driven in part by the fact that it was his actions that extended the statute. 

Had he not taken the actions suspending the statute, it is possible that the suit would have been brought earlier.  My observation is that the DOJ trial attorneys who bring these suits calculate the time from for bringing them, or rely on the IRS calculation of that time in the referral letter, and wait until near the last minute to bring suit probably because they have too many cases in their inventory and because hopes springs eternal that the taxpayer will pay the liability eliminating the need for the suit.

Mr. Weiss first extended the statute by filing a CDP request.  He argued that he only filed a request for an equivalent hearing which did not extend the statute of limitations but the Tax Court and the subsequent courts found that he filed within 30 days of the issuance of the CDP notice and that resulted in a CDP request rather than a request for an equivalent hearing.  Since he requested a CDP hearing, he suspended the statute of limitations on collection.  He appealed the determination that he had filed a CDP request up to the Supreme Court.  In this second round of cases, he contests that the request for certiorari in the first round of litigation suspended the statute of limitations on collection.

The post linked above discusses his loss at the district court level arguing this issue.  Now, he has an opinion from the Third Circuit affirming the lower court decision that the cert request further extended the collection statute of limitations (CSED).  While the outcome here may impact only a few taxpayers, the analysis provides important insight for those concerned about calculating the CSED.

The Third Circuit described the important facts as follows:

The material facts are undisputed. After the D.C. Circuit issued the mandate, no less than 129 days remained of the ten-year statute of limitations. Weiss filed a petition for a writ of certiorari 62 days later, and 40 days after that, the Supreme Court denied his petition. The date on which government commenced this action was 64 days after the Supreme Court’s denial of Weiss’s petition for a writ certiorari and 166 days after the D.C. Circuit’s mandate.

Using those dates, the timeliness of this case turns on questions of law. If the statute of limitations, which had no less than 129 days remaining, is tolled for either the time between the D.C. Circuit’s mandate and Weiss’s petition (62 days) or the time from Weiss’s filing of that petition to its denial (40 days), then the government’s filing of this case 166 days after the D.C. Circuit’s mandate would be timely. But if both of those increments associated with Weiss’s petition fail to suspend the statute of limitations, then the government’s filing would be too late. As elaborated below, the time associated with Weiss’s petition (a combined total of 102 days) tolls the statute of limitations, and that renders this action timely — without the need to address the applicability of the ‘final determination’ provision relied upon by the District Court.

The Third Circuit points out that Congress “did not define two relevant terms — ‘appeals therein’ and ‘pending.’” It searches for their ordinary meaning finding:

The first of those, ‘appeal,’ had two common meanings when § 6330 was enacted in 1998. Contemporary dictionaries reveal that it could be used, in a general sense, to mean a “[r]esort to a superior (i.e. appellate) court to review the decision of an inferior (i.e. trial) court.” Appeal, Black’s Law Dictionary (6th ed. 1990). Under that general meaning, the term ‘appeal’ would include both appeals and petitions — those filed in court and those filed administratively. See id. But as evidenced by a number of federal statutes and court rules, the term ‘appeal’ could also refer to a narrower class within that larger class: it could mean a method of seeking review of an order that is distinct from other such methods, such as a petition. As used more narrowly, appeals are typically initiated in the court that issued the order,2 while petitions are often commenced through a filing with the reviewing body.3 Cf. Garland v. Ming Dai, 141 S. Ct. 1669, 1677-78 (2021).

The court also found that the word therein had to common meanings creating four possible combinations for the phrase “appeals therein.”  Because it finds that three of those combinations would create a meaningless result, it finds:

The fourth combination, however, does not offend the canon against superfluity. If the term ‘appeals’ receives its broader meaning (to include petitions) and the word ‘therein’ means ‘in such matter,’ then the phrase ‘appeals therein’ refers to any appeals or petitions from a Collection Due Process hearing. That understanding accounts for the entire judicial review process: the Tax Court reviews petitions from the Collection Due Process hearing, see 26 U.S.C. § 6330(d)(1); see also 26 C.F.R. § 301.6330-1(b)(2), (f)(1); the appellate courts review appeals from the Tax Court as well as petitions for panel rehearing and en banc rehearing, see 26 U.S.C. § 7482(a)(1); Fed. R. App. P. 35, 40; and petitions for certiorari from the appellate courts may be filed with the Supreme Court, see 28 U.S.C. § 1254(1).

The court then examines the word “pending.”  It finds two definitions of this word but says

For purposes of § 6330(e)(1), only the second definition works. The tolling clause identifies a singular ‘period’ of suspension. The first definition of ‘pending,’ however, would involve several distinct periods of piecemeal tolling. The statute of limitations would be suspended for the hearing and every appeal, but not for the interim periods between resolution and appeal. If Congress had intended to account for such intermittent tolling, it could have used the word ‘periods.’ But by instead using the singular term, ‘period,’ the statute allows only the second meaning of ‘pending,’ such that it describes a continuous period inclusive of not only the hearing and ‘appeals therein’ but also any intervening periods of indeterminacy during which an appeal or petition could be filed.

Applying the second definition here, the statute of limitations remained tolled for the 62 days between the D.C. Circuit’s mandate and Weiss’s petition for a writ of certiorari.

It then holds that the suit to foreclose brought by the IRS was timely because of the time remaining on the CSED as a result of the statute of limitations suspensions. 

Mr. Weiss got his money’s worth out of filing the appeal from the perspective that the Third Circuit gives an extensive analysis of the impact of bringing litigation on the collection statute of limitations.  Whether this extensive analysis will give Mr. Weiss pause before seeking cert a second time is unknown.  It might also give future taxpayers pause in bringing appeals if they seek to ride out the CSED as their path to defeating payment of the tax.  Of course, just because the IRS can move forward with this suit does not mean it will ultimately collect from Mr. Weiss.  Assuming it wins the foreclosure case, it will have an almost unlimited time period within which to collect but that does not mean it will be able to do so.  Mr. Weiss has lost another battle but until the IRS actually collects, he has not lost the war.

Dismissal of Late Filed Petition in a Post-Boechler World

In Carroll v. Commissioner, Dk. No. 11753-20L the Tax Court entered an order on November 16, 2022, dismissing a late filed petition.  Both respondent and the Court did everything I would expect leading up to the dismissal.  Petitioner, proceeding pro se, did not respond.  So, it is unknown if she had a basis for equitably tolling the time for filing the petition.

read more…

I have not read the pleadings in the case.  As a result, this post is based on some guesses and information available publicly (without payment or significant delays) in the orders of the Court.

Petitioner appears to have filed her Collection Due Process petition late.  This case was filed on September 21, 2020, well before the decision in the Boechler case.  On November 9, 2020, the IRS filed a motion to dismiss for lack of jurisdiction.  The Court ordered a response to the IRS motion and petitioner requested more time.  At some point the case was probably suspended pending the outcome of Boechler.  Because the motion was still pending when the Boechler decision came out, the Court issued an order on May 9, 2022, denying the motion to dismiss for lack of jurisdiction and directing the IRS to file an answer.  It did.

In answering the petition, the IRS made affirmative allegation in paragraph 8 of its answer.  When the IRS makes affirmative allegations, a petitioner has a chance under Tax Court Rule 37 to file a reply admitting or denying the affirmative allegations in the same way the IRS would admit or deny allegations in its answer. 

Here, petitioner did not file a reply.  Rule 37(c) allows the IRS to file a motion requesting to have its affirmative allegations deemed admitted.  The IRS did exactly that in this case within the appropriate time frame.  Although the Tax Court could deem the allegations admitted without any further action, in my experience, it always issues an order pointing out to the petitioner the consequence of not filing a reply and offering the petitioner the opportunity to file a reply in response to the order.  The Court issued an order on August 8, 2022, giving petitioner until September 6, 2022, to file a reply.  She did not.

On September 26, 2022, the IRS filed a motion for judgment on the pleadings.  The Court ordered petitioner to respond to this motion by October 18, 2022.  She did not respond.  The Court held a hearing on November 15, 2022, on the IRS motions.  It then entered the order on November 16, 2022, dismissing the case.

There is nothing unusual about this case but it is the first post-Boechler case in which I have seen an order following exactly the process that I expect to take place now that the time for filing a petition in a Collection Due Process (CDP) case is acknowledged to not be a jurisdictional time frame.  The IRS filed its answer with affirmative allegations regarding the lateness of the filing of the petition.  Although I have not seen the IRS answer, I expect that it provides the date of the issuance of the CDP determination letter and the date of the filing of the petition noting that more than 30 days elapsed.  The IRS followed up after filing the answer appropriately by moving to have its affirmative allegations deemed admitted under the Rule 37(c) process.  The Court gave petitioner every opportunity here to provide an explanation and she did not.  Dismissal was appropriate.

I anticipate that we will see a lot more Rule 37(c) motions going forward.  Pro se taxpayers don’t understand the provisions calling for a reply, or their obligation under Rule 39 to plead facts in the reply giving rise to equitable tolling as an affirmative defense to the statute of limitations argument raised by the IRS in the answer.  Many will take advantage of the first (or second) time period provided by the rule or a court order and explain why the petition was filed late.  Those petitioners will receive a hearing on the reasonableness of their excuse.  Some petitioners will fail to respond and face an outcome similar to Ms. Carroll.  Unless Chief Counsel’s office gets a lot more diligent about monitoring the timeliness of the filing of petitions, something that I expect will happen, there will also be cases where the failure of Chief Counsel attorneys to do what the attorneys did in this case will result in a waiver of the timeliness argument allowing the lucky late filing petitioners to keep their case in Tax Court despite the tardiness of the filing of the petition.

I expect that the Chief Counsel attorneys have received instructions on how to handle a late filed case and the attorneys in the Chicago office followed that playbook perfectly here.  If those instructions have not been issued, the Chief Counsel attorneys now have a case template they can follow.

Seeking First Time Abatement Through Collection Due Process

In Kelly v. Commissioner, TC Memo 2022-73 petitioner sought to use Collection Due Process (CDP) as a means to obtain first time abatement.  First time abatement was not the only issue in the case but seeking to have the Tax Court decide that the IRS had improperly administered its policy granting relief seemed a stretch.  We have talked about the issue of first time abatement in prior posts here and here.  These were some of the first posts written for this blog.  The policy has been around for many years.  It is a popular policy but one that leaves taxpayers dissatisfied when the IRS uses it instead of using another basis for abatement, like reasonable cause, so that the taxpayer can preserve the first time abatement for another filing.  I wrote a post about reversing first time abatement where the IRS later realized it had granted abatement in derogation of its policy.

I did not look at the underlying pleadings filed but was struck that the case did not involve a discussion of prior opportunity.  With penalties, the IRS often gives the taxpayer an opportunity to go to Appeals if the first line denies the request for penalty abatement.  If the IRS gives that opportunity, the taxpayer cannot raise the merits of penalty abatement in a CDP case.  Here, there was no discussion of prior opportunity but just a discussion of the merits of the penalty request.


During the years at issue, 2013-2015, Mr. Kelly was a securities broker in New York City making over $1 million each year.  He did not timely file his returns for these years.  At the end of 2017 he filed his 2013 and 2014 returns reporting tax of more than $500k each year without remittance to which the IRS added failure to file, failure to pay and estimated tax penalties.  In early 2018 he filed his 2015 return without remittance but reporting a tax due of more than $400,000 to which the IRS added penalties.

The IRS sent CDP notices of intent to levy and filed notices of federal tax lien (NFTL) which also triggered CDP notices.  He timely requested a hearing seeking an installment agreement, withdrawal of the liens and abatement of the penalties.  The Settlement Officer explained during the CDP hearing that first time abatement was a non-starter because he had been delinquent before including in 2012.  Mr. Kelly also requested abatement based on reasonable cause.  He explained that his wife spent money lavishly and he went through a divorce in 2015 which caused him experience financial hardship, emotional problems and depression.  The SO rejected this request as well citing to his history of non-filing, his high income and his lack of a payment protocol.

Mr. Kelly also ask for lien withdrawal because the NFTL put a mark on his securities license which might impact his business.  The SO was not moved by this argument either.

Finally, Mr. Kelly proposed a partial pay installment agreement; however, he was not current on his 2019 liability causing the SO to reject this request and issue the notice of determination.  In the Tax Court case the IRS sought summary judgment. 

The Tax Court agreed with the SO that he did not qualify for first time abatement because he had unreversed additions to tax within three years of the year for which he sought the application of this policy.  I was a bit surprised that the Court ruled on the first time abatement issue and consider that a victory for taxpayers even if it did not help Mr. Kelly in this instance.

Next, the Court looked at the alternate argument of reasonable cause.  The Court said he faces a “decidedly uphill battle in attempting to show reasonable cause.”  It noted that his excuses, the initiation by his wife of a divorce and resulting depression, only occurred at an unspecified time near the end of the three year period of non-payment.  Mr. Kelly provided no explanation for his history of non-compliance while making over $1 million each year.  His high income also made his other excuse, financial hardship, difficult to understand.  Despite the fact the Court sees little chance of success on these arguments, they present factual issues in dispute and not ones suitable for summary judgment.

The Court then found the SO satisfied the statutory requirements of 1) verification – concluding the IRS properly notified Mr. Kelly of the NFTL filing; 2) rejection of the partial pay installment agreement – concluding the rejection met the IRM guidelines due to his ongoing failure to comply and history of non-compliance; 3) lien withdrawal – concluding that Mr. Kelly’s allegations that the liens would adversely impact his future income were “entirely speculative”  and even if not speculative reflected decisions within the control of the IRS not the Court; and 4) balancing – concluding that the size of the liabilities, his repeated failure to file returns or even to make modest estimated tax payments supported the conclusion the SO did not abuse his discretion.

The outcome here is unremarkable, but the number of different arguments made by Mr. Kelly give others an opportunity to see the many ways a taxpayer can attempt to attack a collection action.  His long period of non-compliance and high dollar liabilities make Mr. Kelly an unsympathetic figure for the relief he requests.  Still, he provides us with a roadmap to the many types of arguments available.  The Court’s careful look at both the statute and the IRM shows that the IRS needs to take care to follow its internal procedures as well as Congressional instructions if it hopes to prevail in support of its collection decisions when faced with a well-funded and well-crafted argument attacking those procedures.  Most petitioners in this circumstance will not have the resources Mr. Kelly had to attack the IRS actions, but his unsuccessful attempts show others with better cases where they might go to find relief.

Robots Are Not the Only Problem and Disbarment News

On October 24 we posted about IRS efforts to free up phone lines by filtering out the robocalls.  To the extent that the post, which was inspired by a listserv posting by Barbara Heggie, raised hopes for a smoother path to the IRS through the phone lines, Barbara was back on the listserv on Wednesday, October 26 dousing those hopes.  Here’s Barbara’s graphic description of her experience trying to call that day:

it took eight tries to get placed on hold, even with a couple of them involving various tests of my humanity. Today, it took twenty-five, and most of them started with the quiz bot.

As the minutes wore on, I realized that this particular bot needs an annoying amount of time to determine whether I’m one of them or one of us. In fact, quizzing me on my math skills, auditory processing, and recall ability takes exactly twice as long, on average, as the non-quiz bot version of PPS purgatory – one minute, rather than thirty seconds.

I do admit to a tiny shot of dopamine whenever I get the math question right, but the thrill wears off by about Dial #20. And because I had to stay mentally nimble, I couldn’t check out and focus on something else for those precious extra seconds.

Yesterday was grumble-worthy; today was aggravating, particularly because the call dropped just as my PPS representative was giving me the numbers of the bank account where my client’s stimulus payments were deposited. Another twenty-six dials, and I’m in the queue again. Wish me luck.

It’s obvious from this message that robocalls are not the only problem.  Maybe $80 billion can fix this problem.  It would be nice to have calls get through without the problems described by Barbara and experienced by most of the readers of this blog.  While it’s nice to have math skills affirmed, it’s even nicer to reach someone to speak with about a problem without feeling that you have scaled Mount Everest just to get to the conversation.

read more…


Moving on from the fun topic of waiting to reach the IRS, we offer some possible additional reading material while you wait.  On October 26, 2022, the Tax Court issued its most recent list of attorney discipline orders.  Like most of these orders in the Tax Court, the three attorneys listed in this order are receiving discipline based on the reciprocal rules resulting from discipline in their local bar and not from something they did in a Tax Court case.  I have written about disciplinary matters several times in the past.  Here and here are posts from earlier this year.

The first case involving Paul Saul Haar seems a typical case of reciprocal discipline.  It struck me that he actually self-reported his state bar disciplinary action to the Tax Court which seems rare in my reading of these cases.  He failed to respond to the Tax Court’s show cause order causing his right to practice before the Tax Court to be suspended but with the right to apply for reinstatement.

The second case involving Isaac Henry Marks involved a situation in which it appeared the multiple bars in which he was admitted and the reciprocal discipline procedures of each proved too much for him to keep up with.  It appeared he may have had a minor trust account problem in DC causing disciplinary action there which triggered reciprocal discipline in Maryland, Kansas and the DC Circuit Court.  He got restored in DC relatively quickly but was still working out the reciprocal actions in the other jurisdictions.  The cascading impact of the first action appeared to be something he was having trouble getting in front of.

The third and final case involving David H. Miller was an easy case from the standpoint that he was convicted in Virginia of several serious crimes though not crimes which appeared to have any tax implications.  Disbarment here was an easy remedy to reach.  What struck me about this order was the requirement that he surrender to the Tax Court within 20 days his certificate of admission to practice before the Court.  The return of a physical document of this type seemed a bit archaic.  It was not required of the others who were disciplined but this was, by far, the most serious case and the one in which reinstatement seemed quite remote.  I wonder what the chances are that he will send in that physical document and what the consequences are of not sending it in.  It seems like his disbarment is complete without its return, but perhaps the physical document itself bears more importance than I would have imagined.

Chapter 11 Confirmation and Lifting of Automatic Stay

In Cochran v. Commissioner, 159 T.C. No. 4 (2022) the Tax Court decided in a precedential opinion that confirmation of a chapter 11 plan of reorganization of an individual does not lift the automatic stay imposed by BC 362(a)(8).  The decision reverses an earlier Tax Court decision issued before a crucial change in the law.  This decision will impact a small minority of individuals.  The situation has a fairly easy work around in most cases but still deserves some attention as a precedential opinion of the Tax court.


Each year debtors file a relatively tiny number of bankruptcy petitions under chapter 11 of the bankruptcy code. For the 12-month period ending Sept. 30, 2022, there were 4,762 chapter 11 bankruptcy filings. In contrast, there were 229,703 chapter 7 filings and and 149,077 chapter 13 filings. Individual chapter 11 filings make up only a fraction of the total number of chapter 11 cases. For the the 12-month period ending June 30, 2020, there were only 464 filings. Of that minuscule number of individual chapter 11 cases only a much smaller number will have a pending Tax Court case.  So, this decision has a limited universe of impacted individuals.

Individuals seeking to reorganize their debts typically file chapter 13 cases because it is easier and cheaper to do so; however, some individual debtors cannot file in chapter 13 because of the amount of debt they owe.  Chapter 13 places dollar limitations on the debtors who can seek relief under its provisions.  The individuals who do not qualify for chapter 13 because of debts in excess of the limits can nonetheless seek reorganization through chapter ll.  That’s what the Cochrans did here.

After filing their chapter 11 petition, the Cochrans took all of the actions necessary to obtain a confirmation of their chapter plan.  At issue in their Tax Court case is the impact of obtaining a confirmed plan.  While I mentioned at the outset that the case involves the automatic stay imposed by BC 362(a)(8), the relevant sections for determining the impact of the plan on this provision of the automatic stay are BC 1141(d)(5) addressing the effect of a chapter 11 confirmation and BC 362(c) addressing the termination of the automatic stay.

Starting with the central Bankruptcy Code section at issue, it’s helpful to understand that BC 362(a)(8) is a bit of an outlier in the list of eight things that the filing of a bankruptcy case brings to a halt.  The automatic stay seeks principally seeks to protect the bankruptcy estate.  Once a debtor files bankruptcy, the debtor has sent up large signal flares that severe financial troubles exist.  it would create havoc if these signals caused creditors to come in an start picking apart the debtor’s assets.  So, the automatic stay generally requires creditors to stand back in order to allow for an orderly disposition of the estate.  Subparagraph (a)(8) was a late legislative addition to the list of stayed actions and has a different tenor than the others.  The principle purpose of (a)(8) was to keep the debtor from abandoning a Tax Court case because of lack of financial concern for the outcome.  The stay gives the trustee time to come in and protect the interest of all creditors by pursuing the case or, alternatively, postponing the Tax Court case so that the outcome is of concern to the post-petition debtor and no other creditors of the estate.

The reason for the existence of the stay, I think, drove the arguments of the petitioner in this case.  The Tax Court describes their argument as follows:

Petitioners also broadly cite Kovitch v. Commissioner, 128 T.C. 108, 112 (2007), People Place Auto Hand Carwash, LLC v. Commissioner, 126 T.C. 359, 363 (2006), and 1983 Western Reserve Oil & Gas Co. v. Commissioner, 95 T.C. 51, 57 (1990), aff’d, 995 F.2d 235 (9th Cir. 1993), for the proposition that an automatic stay under 11 U.S.C. § 362(a)(8) “should not apply unless the Tax Court proceeding possibly would affect the tax liability of the debtor in bankruptcy.”

The Court responded by stating:

These cases are distinguishable on the basis that they were concerned with ascertaining which entities related to a debtor should fall within the scope of 11 U.S.C. § 362(a).

Both the Court and the petitioners are right.  The Court is technically right that it does make a difference whether the debtor is an individual or an entity because the discharge provisions and there for the provisions dealing with the end of the automatic stay differ.  The petitioners are right that the reason for the creation of the automatic stay makes no difference in this case.  Since moving forward with the Tax Court case at this point does nothing to preserve the assets of the case or protect the petitioners as debtors, there is no point to using the automatic stay to keep the Tax Court case from proceeding.  The decision here, however, follows a unbroken line of Tax Court decisions strictly limiting its ability to move forward due to (a)(8) until a technical lifting of the stay occurs even if the stay does nothing to protect the debtor or the estate in the specific context of the case.

So, we have a code section that the Tax Court strictly interprets and one that says Tax Court cases stop when the automatic stay exists.  The parties agree that the automatic stay came into existence with the filing of the bankruptcy petition.  The legal disagreement, aside from the policy disagree discussed above, is the impact of the confirmation of the petitioner’s chapter 11 plan on the automatic stay.  The Tax Court gets the impact precisely right in a relatively short opinion. 

Under the version of the Bankruptcy Code enacted in 1978, the plan confirmation lifted the stay.  That outcome was reflected in the Tax Court’s earlier decision on this issue in Moody v. Commissioner, 95 T.C. 655, 658 (1990).  However, in 2005, during the last major change to the bankruptcy laws, Congress amended the relevant bankruptcy code section regarding the effect of plan confirmation in individual chapter 11 cases because of other changes it made principally regarding discharge.  It amended BC 1141(d)(5) addressing the impact of plan confirmation of the plan of individual debtors.  The provision now says confirmation does not discharge the individual’s debts and that discharge will not occur until some later time.

The amendment to the impact of the confirmed plan has an impact on when the stay comes to an end.  As already mention the stay came into effect with the filing of the bankruptcy petition.  In order to get around the prohibition of BC 362(a)(8), the Tax Court is looking to see if the stay has lifted to allow the case to move forward.  BC 362(c) provides the rules regarding the lifting of the stay and states that the stay is lifted at the earliest of the closing of the bankruptcy case, the dismissal of the bankruptcy case or the granting or denial of a discharge to the debtor. 

With the change to the effect of confirmation in an individual case, the plan confirmation does not impact discharge.  The confirmation of a plan does not close or dismiss the bankruptcy case.  So, nothing had happened in the Cochran’s bankruptcy case to trigger a lifting of the stay and BC 362(a)(8) sits there stopping the Tax Court case from moving forward even though at this point the Tax Court case will have no adverse impact on the bankruptcy.  The decision while technically correct does not serve any real purpose.

Instead of fighting about this with the Tax Court, it should be fairly easy in these type situations to convince the bankruptcy court to enter a specific order lifting the stay to allow the Tax Court case to move forward.  That’s the workaround.

Congress might consider putting more effort into drafting BC 362(a)(8) to define the situations in which the stay applies to the Tax Court in a way that has it apply only when it would be meaningful to do so.  I suspect, aside from the fact there is a relatively easy work around in most cases to this problem, Congress simply feels it has more important things to do.