The most exciting designated order during the week of June 3, 2019, by far, was in Docket No. 14307-18, Scott Allan Webber v. CIR. It was so exciting that it was worthy of its own post, which is here (and I’m thankful to William Schmidt for giving it the attention it deserves).
Docket No. 15445-18, Stephen E. Haney v. CIR (order here), Docket No. 15435-18, Ricardo C. Lacey & Cynthia V. Lacey v. CIR (order here), and Docket No. 15315-18, Steven E. Ayers & Donna J. Ayers v. CIR (order here)
Typically, when I come across three designated orders with nearly identical language it is because the same order was issued in a consolidated docket. But that was not the case during the week of June 3; rather there were three separate cases involving the same bad actor. What he did was bad, but not bad enough to rise to the level of the Court making a Department of Justice referral – which is a little surprising.
Detailed facts about each petitioner’s specific case were not included in the orders, but each one is before the Court on a motion to dismiss for lack of jurisdiction, and the same oddity happened in all three cases. A petition was filed with the Court, which included a copy of a notice of deficiency, but the date on the petitioner’s notice of deficiency didn’t match the date on the version the IRS had. The IRS produced its version as well as a certified mailing list reflecting the date that matched the IRS’s version.
The Court conducted an evidentiary hearing to develop a record that would explain why there was a discrepancy between the dates on the notices.
The Court noted other similarities in the cases: all three petitions originated from the same tax preparation company (according to the return address labels), and appear to have been signed by the same person, but there are no markings or disclosures to indicate that a third party signed on behalf of the petitioners.
In an effort to gather information, the IRS subpoenaed the accountant associated with the tax preparation company (the “accountant”) on the return address labels. They directed him to appear and testify at the evidentiary hearing, but he did not.
Instead, a taxpayer unrelated to any of the three cases came to testify for the IRS about his experience with the accountant. In his testimony, the taxpayer explained that he invested in a company and later took substantial losses related to the investment on his federal income tax return. The IRS proposed to disallow the losses and on the advice of his tax preparer, the taxpayer met with the accountant (who was the tax preparer for the company the taxpayer invested in). The accountant assured him that the IRS was incorrect, and he would take care of the matter and the taxpayer signed a power of attorney allowing the accountant to represent him.
Then, the taxpayer received a notice of deficiency and forwarded it to the accountant, who he believed was still his representative at the time. The taxpayer reached out to the accountant several times to inquire about whether a petition had been filed with the Court and did not receive a response from the accountant but did receive a bill from the IRS.
Sometime later, the taxpayer received notice from the Court that it had received a petition on the taxpayer’s behalf. The IRS filed a motion to dismiss in the case alleging that the petition was not timely filed. The IRS alleged that the notice of deficiency had been altered to make it appear timely filed. The taxpayer hired an attorney to help him respond to the motion, and in his response claimed that he believed his former representative, the accountant, had altered the dates.
Based on the taxpayer’s testimony and IRS records, the Court finds that the accountant was responsible for altering the dates in all three designated order cases. The Court also warns the accountant against misleading the Court, harming taxpayers and wasting the Court’s and IRS’s resources in the future.
It is unclear from the orders (and from some additional research) whether the accountant actually has the authority to represent individuals before the IRS and Tax Court. In all three cases petitioners are designated as pro se, and presumably, the petitioners would have needed to ratify their petitions if they did not authorize the initial petition’s filing.
One last oddity is that motions for continuance were filed by petitioners in all three cases on the exact same day, a week after the orders were issued and the cases had been dismissed, which may suggest an attempt at continued involvement by the accountant.
Docket No. 19502-17, Cross Refined Coal, LLC, USA Refined Coal, LLC, Tax Matters Partner v. CIR (order here)
This next order addresses discovery motions; more specifically, both parties’ motion to compel the production of documents. The parties have decided to utilize a “quick peek” review and the Court approves. Procedurally Taxing covered this uncommon procedure back in 2016 in a post by Les, here. Since it has been a few years (and I assume educating the public on this option was the reason the Court designated the order), here is a quick refresher:
The procedure originates from Federal Rule of Evidence 502, which states, “A federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court.” As a result, the procedure can speed up the discovery process by allowing parties to review substantial amounts of information without the risk of waiving any privilege.
In the remaining designated orders, the Court calculates the value of a donated building façade in a case involving a disputed charitable contribution deduction after the parties couldn’t reach an agreement (order here), and the Court grants a summary judgment motion in a CDP special circumstances offer in compromise case (order here).