No, not another reality TV show for tax practitioner CPE. Jeffrey Pesarik, T. C. Memo. 2026-20, filed 2/23/26, has a trusty attorney who did a good job eliciting enough from Jeff and his credit card and bank statements to eke out $21K of capital expenditures to offset the sale of one of the two (count ’em, two) houses he built or rehabbed, both of which he sold in the same year. Trouble was, Jeff didn’t report either sale.

I’m surprised Jeff, a property manager in multiple States, never encountered a 1099-S.

Howbeit, as to one building, Ch J Patrick J. (“Scholar Pat”) Urda allows Jeff nothing, and moreover denies him Section 121 primary residence exclusion, as Jeff has no useful paperwork and his testimony is less than convincing.

On the other, his credit cards showing charges from builders’ merchants allows Ch J Scholar Pat to cut Jeff some Cohanslack.

Trusty attorney’s try to get Jeff off negligence chops doesn’t get far.

“Mr. Pesarik also argues that assorted disabilities, including posttraumatic stress disorder, depression, and attention deficit hyperactivity disorder, supply reasonable cause. ‘Where a taxpayer’s disability is raised as part of a reasonable cause defense, we have looked to the severity of the disability and the impact it had on the taxpayer’s life . . . .” Remisovsky v. Commissioner, T.C. Memo. 2022-89, at *5 (quoting Jones v. Commissioner, T.C. Memo. 2006-176, 2006 WL 2423425, at *6). Mr. Pesarik fails to demonstrate that his disabilities interfered with his ability to satisfy his tax reporting obligations or led to the substantial understatement here.” T. C. Memo. 2026-20, at p. 13.

It’s been years since I stood in the bonechilling cold of a stone cellar in a small Hudson Valley town, as the cellarmaster drained a quarter-glass from a barrelthief and handed it to me. “Might need another year,” we agreed. Turned out it did, and the result was good.

I remembered the same feeling as I read Judge Christian A. (“Speedy”) Weiler’s 46 (count ’em, 46) page giant slalom through the anfractuosities and permutations of Otay Project LP, Oriole Management LLC, Tax Matters Partner, T.C. Memo. 2026-21, filed 2/23/26.

For backstory, check out my blogposts “The Best Discovery,” 11/1/21, and “Innocents, Take Notice,” 10/7/24. Watching a Tax Court case develop is like tasting that raw red liquid in an ice-cold cave and trying to divine what it will become; it’s more instinct than ratiocination.

Anyway, the Section 743(b) basis adjustment, intended to defer indefinitely three-quarters-of-a-billion-with-a-b profit deferred by Section 460 completed contract method accounting fails the economic substance test, despite petitioner’s objection that express statutory language o’ercrows said test. 9 Cir, whence Otay is Golsenized, says no. Where the parties, ostensibly splitting up their real estate empire, continue to hold construction obligations, their split-up is a sham.

“Respondent also correctly points us to the public bond and construction obligations which OPLP retained as evidence that Al and Jim did not intend to actually separate all business operations. Accordingly, we conclude that the transactions at issue were a tax-driven sham since these transactions primarily resulted in mere tax benefits. In other words, when considering the nontax reasons for the transactions at issue, any third-party investor would not benefit from the restructuring and distributions from OPLP.” T. C. Memo. 2026-21, at p. 41.

Multiple consultations with high-priced accountants and multiple tax lawyers, other than promoters, save Al and Jim from gross overvaluation and negligence chops.

Btw, the Winter Olympic Committee should consider the diagram at p.16 for the next giant slalom competition.

On the tines is James Haber, 166 T. C. 2, filed 2/23/26. James (“Little Jim”) Haber, famous immunologist and dodgeflogger who furnished much blogfodder, goes down for Section 6707 assessable chops for Section 6111 nonreportage.

Little Jim’s trusty attorneys elected to try a CDP and avoided a trip to Appeals.  They tried a divisible (partial) payment in USCFC, which tossed them because the Section 6707 chops are nondivisible. Must pay all to seek refund. Fed Cir affirms and denies rehearing. CDP, stayed during USCFC litigation, denies challenge to chops as Little Jim had a prior chance at Appeals. They petition.

No go, says Judge Emin (“Eminent”) Toro.

Reg Section 01.6330-1(e)(3), Q&A-E2 says a trip to Appeals is a prior opportunity to contest chops; Tax Court decisions have upheld the reg. And declining the trip is the same as having chosen the trip. See my blogpost “The CDP Is the Trial,” 9/19/22. Little Jim can’t say the Appeals route would have been “precooked” or meaningless because they never went. Their Chenery claims about which IRS communication was the offer of the Appeals trip likewise fails; all the letters are there. And timeliness of the letters is likewise irrelevant.

There’s the standard Appointments clause argument, but that fails because they never showed up before the AO. Anyway, Tooke took care of that argument. See my blogpost “Scrapbook, 1/29/25.”

Of course, Loper Bright gets a workout, but Judge Eminent Toro has CCA learning to stave off that attack.

Their Fifth Amendment attack is unclear, says Judge Eminent Toro, and the Eighth Amendment argument on the underlying penalties are off the board on prior right to contest.

I give Little Jim’s trusty attorneys a Taishoff “Good Try, Third Class” for effort. They should have read my blogpost “Appeal? Don’t  Appeal? You’re Forked,” 3/20/17.