Summary Opinions for 10/24/14

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Beth & Stephen Halloween 2014

Beth & Stephen, Halloween 2014

Happy belated Halloween!  Fun week last week for Procedurally Taxing.  In addition to being Halloween, we had our first post published by Forbes, which Keith drafted and can be found here.  You can find our announcement about Forbes here.  Our commenters seem especially excited about the partnership, and our motivations for running PT.  Les claimed in the announcement that we aren’t getting paid for the Forbes posts – which is bunk.  I’m checking with my lawyers at Dewey, Cheetham & Howe about the validity of that contract.

To the procedure:

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  • The IRS has issued a Chief Counsel Memorandum 20144201F outlining its position on the Alternative Tax Net Operating Absorption Rules.  Some commentators were arguing that changes to the applicable statute as part of the Worker, Homeownership and Business Assistance Act of 2009, which extended some carryback provisions, modified the order in which certain NOLs were taken.  The IRS disagrees, and, in the above advice, indicates the NOL absorption was not modified by the amendment to the statute.   The examples and calculations are complicated, and are being checked by our statistician, Marge Innovera.
  • In NPA Associates, LLC v. Cunning the taxpayer was able to discharge his lien without paying taxes, but the strategy has significant drawbacks.  In NPA, a District Court held that the taxpayer’s interest in property extinguished with his death, as the property was held jointly with the right of survivorship with another person.  The Court concluded that most states provide that upon the death of one joint tenant, the property passes free of any liens to the survivor.  Although the Virgin Islands, which is where the property was located, did not have any cases or statutes on point, the District Court concluded the Supreme Court of the Virgin Islands would not depart from the general rule.  PT’s Russian chauffeur, Pikov Andropov, is taking me to the airport now to fly down to USVI, in order to do on the ground research on the matter.
  • I read this article from attorney Morris Robinson, who I do not know, about AJAC.  Most of the content has been covered before on PT here and here, but I did note in Mr. Robinson’s post that he spoke to someone at the Service indicating a possible “no new issue/no new evidence pledge” may be required by Appeals before accepting a case.  The article states in numbered paragraph 4 that the author was told by an “IRS audit manager and his agent that, before a case is accepted by Appeals, the taxpayer’s representative will be required to sign a form stating that they are not aware of new issues or new information not previously provided to Examination.”  I haven’t had anything go before Appeals in the last two months or so, and have not run across this form yet.  If anyone has a copy of the form letter, I would greatly appreciate seeing a redacted version. We have a guest post on AJAC in the works from a distinguished practitioner, so stay tuned here for more on AJAC and the angst it apparently is causing.
  • The Bankruptcy Court for the Northern District of Illinois, in In Re Frueh, held in late September that a refund received by the taxpayer attributable to EICs and CTCs was not exempt under Illinois’ statute exempting public assistance benefits.  The Trustee’s objection to the exempt funds pertained to the timing of refund, as the trustee did not claim that the EIC and CTC were not “public assistance benefits” under the statute.  Although the Illinois Supreme Court had not reviewed the matter, all lower courts determined that the statute applied only to the right to future payments, and not payments previously received.  The taxpayer had received the refund before the petition.  The taxpayer argued that it was unfair to penalize him for how quickly the refund was issued, stating he would have been able to keep the funds had the check been held-up until after the petition was filed.  The Court did not find this persuasive.  Keith noted that the “tracing” of the underlying type of asset comes up frequently in the bankruptcy context, and there are cases going both ways on the issue.
  • In Cornejo v. United States, the Northern District of California dismissed a pro se incarcerated individual’s refund complain for being untimely. I just found this in Checkpoint, even though it was decided in late 2013.  I suspect it is because the opinion was affirmed by the 9th Circuit earlier this month.   In the case, the Service levied funds from the taxpayer’s account. The taxpayer argued that the limitations period should have been two years from the time when he had a reasonable opportunity to discover the levy.  Both parties agree the period would be two years, and that the funds were drawn in September of 1992, but the taxpayer allegedly first found out about the levy and raised the issue in 2010—presumably because he was in the clink (I think this is the underlying drug trafficking case that got him there).  The taxpayer argued the statute did not start to run until he had a reasonable opportunity to discover all essential elements, which was not until 2010.  He relied on Treas. Reg. 301.7443-1(g).  The Court noted, however, this regulation was not promulgated under the applicable statute, and the claim arose instead under Section 7422(a), to which the two year statute applied.
  • I’m with Jack, it is Pled, even if incorrect.  I think “pleaded” are the type of pants I don’t buy.  Don’t get me started on the Oxford comma; any arguments or complaints about pleaded pants or missing commas will be directed to PT’s customer care representative, Haywood Jabuzoff.
  • Good article on the elusive work/life balance.  Although this article focuses on a man, we all know working mothers have it much worse, which is why PT has a working mothers’ support group, headed by Erasmus B. Dragon.
About Stephen Olsen

Stephen J. Olsen’s practice includes tax planning and controversy matters for individuals, businesses and exempt entities for the law firm Gawthrop Greenwood, PC.

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Comments

  1. Charles Markham says

    I wanted to respond to the new AJAC framework in the context of a recent appeal I had. The examiner had disallowed a very large deduction and had cited two reasons. Both of these reasons, the Appeals Officer and I immediately agreed were incorrect rationale and a misreading of the law. I would assume under AJAC, that that would mean, my client wins and the case is closed since the examiner was wrong. However, the Appeals Officer (who was quite knowledgeable on the particular issue) immediately continued analyzing the issue on the basis of all the law he was aware of and the issue became much more of a “Judgement Call”. It seems to me if I am prevented from bringing anything up in Appeals other than what I presented to the examiner, the Appeals Officer should also not be able to consider anything else either and that if I prove the examiner’s logic to be faulty, we should win period.

    • Thanks for the comment, Charles. This gets somewhat to the “new issue” verse “new argument” on the same issue point, which we have discussed before. I am not aware of any additional guidance as to where that line is, but it is easy to envision two reasonable people disagreeing about whether something is a new issue, or just a new argument about a prior issue. It seems you would like a full prohibition on Appeals considering anything except exactly what Exam was arguing. I can understand that position, but also understand why Appeals would not want to give up all authority to review for other law on the topic (courts do this). I also wonder what the taxpayer recourse is if Appeals does raise a new issue. The notice and IRM create a substantive right in the IRM for the taxpayer; is that sufficient to reverse Appeals if it is correct in the tax determination? I am sure we will start to get more information shortly. Please keep us updated if you have anymore information about dealing with Appeals.

  2. I will beat Bob Kammen to the punch:

    Stephen,

    Fear not. You will never wear pleaded pants. One day, however, you may wear “pleated” pants.

    Sorry, Bob!

    • People often claim my clothes are a crime against fashion. Perhaps someday the pants will have to cop a plea to some lesser offense, in which case, the pants would be pleaded pants. I still woudn’t be wearing pleated pants though.

    • Accuse me of whatever, even of understanding it was a play on words whose only difference is a voiced consonant, as long as you spell my name right.

      Speaking of pronunciation, it rhymes with famine and salmon. Makes you hungry for fish. This summer I visited Osnabruck, the Kingdom of Hanover city my Lutheran ancestors left in the 1840s to farm in southern Indiana. There were half a dozen distant cousins in the phone book, but even the hotel clerk had trouble saying it right.

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