In Uncategorized on 03/10/2014 at 18:36

We all remember that Rule 161 reconsideration motions are not arenas for rehashing failed arguments or coming up with new ones; as Judge Dawson reminds us, “Motions for reconsideration are generally not granted absent a showing of unusual circumstances or substantial error, e.g., mistake, inadvertence, surprise, inexcusable neglect, newly discovered evidence, fraud, or other reason justifying relief.” Order, at pp. 1-2.

And the Order I’m quoting is brought on by our old friends Pilgrim’s Pride Corporation Successor in Interest to Pilgrim’s Pride Corporation of Georgia F/K/A Gold Kist, Inc., et al, Docket No. 12089-10, filed 3/10/14.

The Pilgrims and their several predecessor and et als featured in my blogpost “Just Walk Away?”, 12/11/13, which detailed how the attempted abandonment of some stock, that Pilgrims claimed gave them an ordinary loss, but which IRS said was a capital loss, set up Judge Dawson, wild-carding in Section 1234A, the anti-straddle provision, to uphold IRS.

So why a four-page Order denying reconsideration? Well, Judge Dawson is thorough.

First, Pilgrims want to limit Section 1234A to “derivative” contracts, but that means rewriting Section 1234A, and Judge Dawson won’t go there.

Second, Judge Dawson’s treatment of Section 1234A(1) does not make Section 1234A(2) superfluous, because “(A)bsent section 1234A(2), a termination by offset of a right or obligation with respect to a section 1256 contract might not be considered a ‘termination’ for purposes of section 1234A. Section 1234A(2) ensures that gain or loss from a deemed termination by offset will be treated as gain or loss from the sale of a capital asset and, therefore, is not superfluous.” Order, at p. 2.

Clear? Thought not.

And the Pilgrims conflate Section 165(f) and 165(g). Abandonment does not equal worthlessness. One can abandon property that has some residual value, or even a lot of value. Worthless means worthless. And worth or worthlessness of abandoned property is determined at moment of abandonment, not at some later time when the property might have become worthless.

“Finally, our holding regarding section 1234A has no application to the termination of rights or obligations with respect to property resulting from a gift of the property. Congress has consistently treated a gift as a nontaxable event, consistent with the donee’s carryover of the donor’s basis pursuant to section 1015(a).” Order, at p. 3.

If you give a gift to a qualifying organization, you get a charitable deduction pursuant to Section 170, not a loss.

No new evidence or error of law, so the Pilgrims’ feet must beat their “stern impassioned stress” out of Tax Court.

Footnote to the foregoing- USCA5 reversed Tax Court by decision 2/25/15. Briefly, “Because §1234(A)(1) only applies to the termination of contractual or derivative rights, and not the the abandonment of capital assets, we REVERSE the judgment of the Tax Court and RENDER judgment in favor of Pilgrim’s Pride.” Docket No. 14-60295, filed 2/25/15, at p. 1. Thanks to Wm. Funk, Esq., for drawing this decision to my attention.

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