No, not a story of the Big City apartment-dweller, but rather the saga of The Howard Hughes Company, LLC, f.k.a. The Howard Hughes Corporation, and Subsidiaries, 142 T. C. 20, filed 6/2/14, as unwhimsically told by Judge Wherry.

The late Howard Hughes owned a vast patch of Nevada desert next to Sin City. After Howard left this vale of tears, various successor entities put together a master plan for the soon-to-be planned development of Summerlin, named for the late Howard’s maternal grandmother. One of my old colleagues retired thereto, and it is nice…if you like that sort of thing.

Howbeit, The Howard Hughes Corporation (“THHC”) subdivided, sliced and diced said vast patch, and sold same off to homebuilders and individuals, all of whom were obligated to build dwellings thereon. THHC had to provide infrastructure, off-homestead amenities, stub in utilities both wet and dry, post bonds to secure same, comply with zoning, and cede land to city and county for firehouses, parks, trails, etc.

THHC sold land on bulk sales contracts, pad sales contracts (whence the title of this blogpost), finished lot sales and custom lot sales, all to those who would build homes, and were obligated so to do. Bottom line: although bulk sales and pad sales are pretty much the same, and finished lots aren’t custom lots, at the close of play THHC did a lot of site work and built a lot of infrastructure, but themselves built no homes.

And the homebuilders didn’t subcontract the build-out of the infrastructure and amenities to THHC, which would have enabled THHC to claim the completed contract method that electricians and other trades get. However, that argument earns a Taishoff “good try” for the five (count ‘em, five) lawyers representing THHC.

So THHC’s attempt to use completed contract accounting and reporting, with its deferral of recognition for tax purposes until 95% completion, trying to latch on to Shea Homes (see my blogpost “Medal Count”, 2/12/14), doesn’t connect.

While it’s true that the sales contracts, at least to the extent of the bulks and pads, and maybe some finished, cannot be completed within the same tax year as the binding contract is entered into, so that percentage of completion is available to THHC, completed contract isn’t.

Infrastructure and amenities without the sale of a completed and accepted home is just too much grin and not enough cat for Judge Wherry. The statute and regulations call for “dwellings”. The legislative history behind the complete contract method says it was designed for homebuilders, to make homes cheaper. And Chevron and Mayo say the regulations rule, which THHC doesn’t question.

The amenity packages that got Shea Homes home (sorry, guys) was part and parcel of the building and sale of homes.

And a pad is not a home.