In Uncategorized on 02/12/2016 at 16:11

Even If It Didn’t Work

I can understand counsel getting really tired of a crafty adversary, and trying to torpedo the elusive foe. And, without naming IRS counsel, I want to reward her ingenuity with a Taishoff “nice move” (which is the only reward she will get, I fear, as Judge Wherry isn’t buying her inventive maneuver).

The case is Derringer Trading, LLC, Jetstream Business Limited, Tax Matters Partner, et al., Docket No. 20872-07, filed 2/12/16. And if the cast of characters seems familiar, yes, we’re back in Mr Rogers’ neighborhood. And this is yet another iteration (or reiteration) of the DADs deals Mr Rogers flogged far and wide, the blowing-up of which provided much copy for this blogger and much work for IRS.

So inventive IRS counsel filed a Motion for Order to Show Cause Why Judgment Should Not Be Entered Against Petitioner on the Basis of a Previously Decided Case, citing to one of the many blow-ups of the phony partnerships that married big gains to distressed Brazilian debt, to step up basis and create a loss. IRS counsel wants a finding that the partnership had no basis in the Brazilian junk, but they do have a 40% overvaluation chop.

Derringer and its adherents claim their case is different, but Judge Wherry is dubious about the alleged factual dissimilarities.

He isn’t dubious about IRS counsel’s ingenious but flawed attempt to sidestep Rule 121.

“…in Tax Court litigation, as so often under the tax law, form matters. Where no material fact is genuinely in dispute, this Court’s rules provide a mechanism by which a party that believes the governing law, when applied to those undisputed material facts, compels a decision in its favor, may seek judgment as a matter of law: a motion for summary judgment. See Rule 121. On a motion for summary judgment, the moving party has the burden of showing the absence of a genuine issue as to any material fact, and ‘all doubts as to the existence of an issue of material fact must be resolved against the movant[].’ Electronic Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002) (citing Adickes v. Kress & Co., 398 U.S. 144, 157 (1970), Dreher v. Sielaff, 636 F.2d 1141, 1143 n.4 (7th Cir. 1980), and Kroh v. Commissioner, 98 T.C. 383, 390 (1992)). By seeking a show-cause order, respondent effectively seeks to turn the tables. Rather than assume the burden of showing why judgment should be entered, respondent would impose on petitioner the burden of showing why it should not be entered.” Order, at pp. 2-3.

So make the motion, counselor. And may the Force be with you.



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