Designated Orders Post: Week of 2/26 – 3/2 Estate of Michael Jackson, A New Graev Issue and More

Which brings us the present order…

To some (including a few of my students), insisting on compliance with IRC 6751(b) sometimes looks like a technicality that “bad-actor” taxpayers are trying to take advantage of. In some instances, that may well be so.

Here, with a civil fraud penalty at play, one gets a sense of the “technicality” argument in full force. Judge Buch has little trouble finding that it is within his discretion to open the record in this case (Judge Holmes dealt with a slightly less clear case weeks ago, here). The IRS was playing by the rules that bound the Tax Court at the time of the Hendrickson trial: that is to say, the rules of Graev I and II. Those rules did not require producing evidence of supervisory approval prior to assessment in any case other than those appealable to the 2^nd Circuit. When it appears, as is suggested here, that the IRS actually had supervisory approval but failed to introduce it into evidence (in accordance with the Tax Court interpretation of the law, at the time), there isn’t much beyond a technical argument to be made as to why they shouldn’t be allowed to introduce that into evidence now. Kudos to the taxpayers (pro se) in their zealous self-representation… but I surmise they are just accumulating interest on their tax bill at this point.

Volume 36: Estate of Michael Jackson v. C.I.R., Dkt. No. 17152-13 (order here)

We return to another Designated Order favorite: the never-ending saga of Michael Jackson’s estate. Here, after years of motion practice, a trial that produced 36 volumes of transcript, and no less than three separate stipulations of fact, we arrive at the initial stages of post-trial briefing. When you have this voluminous of a record, with evidence so frequently objected to, it is obviously difficult to know what you can (and can’t) rely on as in the record for the brief you are working on. Judge Holmes kindly takes on the task of sorting out one evidentiary issue confronting the parties: resolving the hearsay objections reserved throughout the stipulations.

For practitioners that want an in-depth analysis of numerous hearsay exceptions, I strongly recommend a close reading of Judge Holmes’ order. For tax practitioners generally, I think another aspect is worth highlighting.

And that aspect is the nature of stipulations. This order highlights the proper method of objecting to stipulations on most evidentiary grounds: you note (thereby reserving) your objection, you don’t fail to stipulate. We have seen instances where the two parties fail to get along, and then fail to stipulate, with the Court generally taking a dim view of that approach. Tax Court Rule 91(a) specifically states that an objection may be noted (to relevance or materiality), but that such objection is not, in itself, is not a reason to fail to stipulate.

Stipulations of fact are extremely important in Tax Court cases, and should not be taken lightly in preparing for trial. You should obviously be sure that you’ve stipulated absolutely everything that you need to (if you are submitting fully stipulated), but you also should consider objections and, even then, what your objections have the effect of doing. In this order, with very sophisticated parties (including the newly nominated Commissioner’s firm) it is informative how the taxpayer phrased some of the objections: not that the exhibits were admissible, but only that they could not be cited to as evidence of “truth of the matter asserted.” That is a nuance that often goes missed (but was stressed by the federal district judge that taught my evidence class): the reason you introduce the evidence is critical to whether (and to what extent) it is admissible.

Going Through the Motions: Langdon & Fuller v. C.I.R. (Dkt. No. 22414-15) and York v. C.I.R. (Dkt. No. 2122-17)

Another set of nearly identical orders provide a quick lesson for tax practitioner. As a change to the usual guidance the Tax Court provides to pro se taxpayers, the orders actually give a lesson to IRS counsel. And that lesson is that when you want the court to “do something,” you generally ask through a motion.

Here, a joint status report was given to the court that likely reflected both parties’ near imminent settlement. All that is left is to draft and file a decision document, so the IRS asks for more time to do so in the joint status report. Pretty uncontroversial… but denied, because the request for additional time was not made in a motion.

I tell my students that there aren’t usually “magic words” you need to know when asking the Tax Court to do something: students pull templates off of the internet with archaic “Here comes taxpayer John Smith by his representative Caleb Smith” and worry that if they omit that line the court won’t have any clue what to do with their document. At the same time, though there aren’t magic words, I tell my students to look to the US Tax Court rules to see what, if anything, the Court would want covered in the motion. As an unfortunate example we’ve had to deal with, there are specific things the Court wants in a motion to withdraw (see Rule 24(c)). A quick search of orders citing to that rule shows order after order denying the motion for failure to address something mentioned in the rule. Where there is a specific rule on point, use it as your lodestar.

These orders, denying a request for more time because it was not made in the form of a motion, may seem formulaic (and thus give rise to a “magic word” worry), but Judge Gustafson does a good job of explaining why it isn’t just insistence on form. For one, it makes the job of the judge easier to ask via motion. By using a motion, you also indicate to the court whether the opposing side has an objection (or is aware of the request at all). But perhaps most importantly, by asking the court to do something via motion you ensure that your request is actually seen and heard… With roughly 22,000 cases pending at the end of October, 2017, one can only imagine the amount of paper that accumulates on any given judge’s desk. As Judge Gustafson seems to hint, judges are people too, and if you want to make sure a request isn’t overlooked, you have to give it the bold heading of a request: in other words, a motion.