We welcome back guest blogger Bob Kamman who practices in the Phoenix area but who, prior to becoming a tax lawyer had a career as a writer. He goes back to his roots to provide us with a story playing out in the Tax Court and in rural Mississippi.
Bob talks about status reports and remarks that only the IRS attorney responds to the status reports ordered by the Court. When I worked at Chief Counsel’s office I had several cases in which “the parties” were ordered to file status reports but that really meant the IRS attorney was ordered to file status reports because the petitioners never did and never suffered any consequences. I understand why the dance is done this way but never liked it. I also note that the Judge retained jurisdiction of this case over a multi-year period. He was not required to do so but does the parties a big favor by hanging on to the case and working it to resolution. Keith
William Faulkner never wrote a story about a Tax Court case. But if he had, he might have told one much like the saga of Dale and Marla, now in its fourth year and reminding us how events can happen at the intersection of tax procedure and real life.
Dale and Marla filed a joint return for 2011. When their petition is filed in June 2014, they are residents of Tallahatchie County, in the part of Mississippi where many of the events in Faulkner’s novels take place. But they no longer live together; they have divorced, and Marla has remarried. Dale (he goes by this, his middle name) is employed as an electrician and Marla is a “medical professional.” The petition, filed with a small tax case “S” designation, is assigned to Judge Joseph Nega, who assumed the bench just nine months earlier. His tenacity is a model for those who admire efforts to move cases along. And for tax professionals, there is a lesson here about Tax Court Rules 61(b) and 141(b), which are infrequently applied.
A trial date is set for down in Jackson on June 15, 2015. But a few weeks earlier, the Court receives a letter with shocking news from a lawyer over in Coahoma County. Dale has died.
A news account from the next day tells more of this death in Tippo (65 miles southwest of Faulkner’s long-time home of Oxford). Dale, 33, was murdered, allegedly by his girlfriend Mandy. The obituary tells us he was buried from the same funeral home where he had served as pallbearer for his grandmother, three weeks earlier.
Of course the trial is continued, and the parties are ordered to file a status report by July 13, 2015. As is usual with Tax Court cases involving a deceased petitioner,
“The status report shall also include after appropriate investigation, (1) the parties are in a position to confirm whether an estate with respect to petitioner [Dale] has been, or will be, opened, and if so, any details of the same, (2) whether there has been an appointment of a representative on behalf of decedent, and if so the name and address of such individual, and (3) the names and addresses of the heirs at law of [Dale], and (4) provide a copy of [his] death certificate.”
IRS files its status report on July 13, 2015. Judge Nega orders another status report for September 14, 2015. IRS tells the Court on August 20, 2015, that Dale’s father Roger has been appointed Special Administrator by the Chancery Court. There is only one heir: Dale’s 13-year-old daughter from a previous marriage. Her grandfather is now responsible for her inheritance, after payment of tax debts.
The caption of the case is amended to reflect that Dale is deceased. Another status report is ordered for November 2, 2015.
When IRS files that status report, Judge Nega orders another one for January 5, 2016. When that one is filed by IRS, another one is ordered for April 5, 2016. When that one is filed by IRS, another one is ordered for June 10, 2016. All of the status reports are filed by IRS; Marla and her former father-in-law may be communicating with the IRS attorney, but are not reporting to Judge Nega.
Further status reports are ordered and received for August 5, 2016; September 30, 2016; November 21, 2016; March 24, 2017; and May 1, 2017. Judge Nega obviously does not want a Small Tax Case from 2014 cluttering his docket.
But the next chapter introduces a problem. Marla calls the IRS attorney on February 8, 2017 to report that Roger had been incarcerated. This development is added to the March 24, 2017 status report. Judge Nega orders yet another status report by June 20, adding:
The report shall also include any current information regarding Roger[‘s . . .] incarceration status (i.e., place of incarceration, prison term, and release date), and indicating the proposed disposition of this case, whether by agreed decision, motion, or submission by stipulation pursuant to Rule 122, Tax Court Rules of Practice and Procedure.
In the June status report, Judge Nega learns that Roger will be in a state prison until July 2021, assuming good behavior. He was sentenced to five years after his March 20, 2017 conviction in Tallahatchie County for manslaughter.
And if Judge Nega doesn’t already know the rest of the story, here is a Faulknerian tale. According to a March 16, 2017 news report — two years after it was reported that Mandy had killed his son Dale, and a few days before his 60th birthday — Roger pled guilty to shooting Mandy once on March 15, 2015, in the front yard of the home where she and Dale lived. According to an investigation by the Tallahatchie County Sheriff’s Office, Roger arrived there to find his son, dead of a single gunshot wound inside his vehicle in front of the house, with Mandy nearby. An autopsy later confirmed that Dale’s wound was self-inflicted.
Roger and the sentencing judge share the same surname, but the local newspaper does not report whether they are related. Faulkner might have liked that detail.
According to the August 4, 2017 status report, the incarceration of Roger prevents Marla from signing decision documents, and the delay causes her to accrue more interest on the 2011 return.
What do an IRS lawyer and a Tax Court judge do in a case like this? The right thing. Judge Nega tells us in his October 26, 2017 order:
On August 4, 2017, respondent filed a Motion To Sever requesting that the Court sever petitioner Marla . . . from the case at Docket No. 15231-14S, in accordance with Rule 61(b) and 141(b), Tax Court Rules of Practice and Procedure. Respondent explains that Roger . . . (the administrator of the estate of his deceased son, Dale . . .), is currently incarcerated in the Mississippi State Penitentiary and that his incarceration prevents petitioner Marla . . . from signing decision documents, which delay causes her to accrue more interest for taxable year 2011. Respondent indicates that petitioner Marla . . . has no objection to the granting of the motion.
So Judge Nega orders:
ORDERED that respondent’s motion to sever is granted, and Marla . . . is hereby severed as a petitioner from the case at Docket No. 15231-14S and is assigned Docket No. 22327-17S . . .It is further
ORDERED that jurisdiction of the case at Docket No. 22327-17S is retained by the undersigned. It is further
ORDERED that the filing fee for the case at Docket No. 22327-17S is waived, and Jackson, Mississippi is considered for purposes of the Court’s records the place of trial therein.
Tax Court Rule 61 is titled “Permissive Joinder of Parties,” but 61(b) deals with “severance or other orders.” It allows the Court to “make such orders as will prevent a party from being embarrassed, delayed, or put to expense by the inclusion of a party.” The Court “may limit the trial to the claims of one or more parties, either dropping other parties from the case on such terms as are just or holding in abeyance the proceedings with respect to them.”
Tax Court Rule 141 is titled “Consolidation; Separate Trials.” Rule 141(a) covers consolidation; Rule 141(b), separation. The Court, “in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition or economy, may order a separate trial of any one or more claims, defenses, or issues, or of the tax liability of any party or parties.”
We do not know the issues in this case, but it appears that Marla wants to settle them and pay whatever tax is owed. That, of course, will mean that her ex-husband Dale’s estate, still administered by his imprisoned father Roger, will not owe the tax. The ultimate beneficiary is Dale’s daughter (who is not related to Marla).
In Faulkner’s 1939 novel “Barn Burning,” a judge tells Abner Snopes, accused of burning down a barn, to leave the county and never come back. Such a remedy is not available to Judge Nega, but perhaps after a few more status reports, it will turn out that sometimes two cases are easier to close than just one.