Archive for April, 2016|Monthly archive page


In Uncategorized on 04/25/2016 at 19:53

Means No Exclusion

International waters, that is, waters not subject to the dominion of any nation, aren’t foreign enough. That’s Judge Gerber’s message to Wendell Wilson and Angelica M. Wilson, 2016 T. C. Sum. Op. 19, filed 4./25/16.

Wendell is a “…ship’s engineer in the merchant marine, and his only employment during [the years at issue] was as an engineer on board oceangoing container ships. As an engineer, he was in charge of the ship’s engine room, including its electrical, mechanical, and electronic systems.” 2016 T.C. Sum. Op. 19, at pp. 2-3. Wendell is a US citizen, and serves on US flag ships. Angelica has dual US-Mexican citizenship; the Wilsons are bona fide residents of Mexico.

Here I would drop a kindly hint to Judge Gerber. Wendell is not a “merchant marine.” He is definitely not a “licensed merchant marine,” 2016 T. C. Sum. Op. 19, at p. 3.

The merchant marine comprises all the ships of a nation that, in the words of a classic 1939 documentary, “keep our larders full, increase foreign trade, bring out supplies to naval bases and navy ships,” and carry passengers. The ships of the merchant marine are crewed by merchant mariners. And please, Judge, never confuse a merchant mariner with a Marine (I use the capital letter advisedly). If you do so to a United States Marine, I will not be answerable for the consequences.

Anyway, the point of this little essay (and again my readers will doubtless say, “He has a point? How quaint.”) is that international waters, belonging to no nation, are not considered “foreign” for Section 911(a) exclusion, which Wendell seeks. “Foreign” means belonging to some government not the United States.

Wendell does get partial credit for time he sailed through truly foreign waters, which no doubt can be substantiated by logbooks.

And Wendell escapes the accuracy/negligence chops, because he used the same CPA to do his taxes for upwards of 20 years, with no previous ill effects.


In Uncategorized on 04/23/2016 at 11:55


Owing to my brother’s and sister-in-law’s overwhelming hospitality, there’s a one-day delay in bringing you John A. Atkinson & Judy B. Atkinson, et al., Docket No. 2683-11, filed 4/22/16.

Harking back to the Part Un version of this post, it’s another conservation easement blown up, but the blowing up took place back in December last year. The issues were much the same as my blogpost “It Ain’t Over,” 7/14/15, so I didn’t blog it.

So Judge Wells sent off the parties to the usual Rule 155 beancount. The parties stipped to $200K of expenses claimed deductible. But their submitted Computations for Entry of Decision (CED) differed, and thereby hangs the cliché.

Though they stipped to the number in gross, they didn’t stip to who got what and for what, and therefore, says IRS, there’s no way to know what, if any, of that $200K was properly deductible.

More elegantly, Judge Wells: “The parties did not, however, stipulate as to details of the services provided or…the amounts paid to each of the payees. Neither did the parties stipulate that the amounts paid to the…payees totaled the amounts deducted by petitioners. Respondent contends that without these stipulations, respondent’s determination of a zero value for the expenses is presumed correct, and that petitioners have failed to produce the necessary evidence to overcome the presumption and support a different determination.” Order, at pp. 1-2.

I can testify from my own knowledge that, at the end of a knock-down, drag-out negotiation, with the empty cardboard coffee cups littering the conference table and the floor, and the ill-digested tuna-salad-on-toast from lunch nine hours ago still wallowing around my innards, a couple the finer points (hi, Judge Holmes) of the hammered-out (and I do mean hammered) deal might get lost when banging out the final, final stip in someone else’s office with someone else’s wordprocessing software. Of course, the support staff have long since gone home at that point.

Judge Wells isn’t buying that finesse, although I do give IRS’ counsel a Taishoff “good try, Third Class.”

Section 212(3) is broad enough to cover payment of fees for obtaining tax advice. And IRS stipped that the fees and payees were “related to the Easements.” That is, the shot-down Easements.

“Respondent [IRS] stipulated that petitioners deducted appraisal, consulting, legal, and accounting fees that were ‘related to the Easements’. The fact that the accountants also provided business services and that the returns were self-prepared are not inconsistent with the stipulations; petitioners stipulated that they deducted only those fees paid in relation to the Easements, and there are plenty of accounting services to be provided apart from return preparation. In the instant cases, respondent provides no reason to set aside the stipulations and find that petitioners incurred expenses to ‘implement’ the Easements but not to ‘determine’ the tax liability related to the Easements.” Order, at p. 2.

Facilitators’ fees aren’t deductible, of course, but fees paid for tax advice, even if wrong but not fraudulent, are. (Clients please copy).

And Judge Wells does a Cohan without citing the composer of my Alma Mater’s fight song.

“…in the event that a taxpayer establishes that a deductible expense has been paid, as in this case through stipulations, but is unable to substantiate the precise amount, we generally may estimate the amount of the deductible expense. The taxpayer must present sufficient evidence to provide some basis upon which an estimate may be made. Through the stipulations and testimony as discussed in our Opinion, petitioners have provided sufficient evidence to support an estimate of between $20,000 and $25,000 in fees paid… to the four remaining payees: attorneys, accountants, NALT, and appraisers.” Order, at p. 2.

NALT is North American Land Trust, hawker of dubious easements and furnisher of incoherent testimony, in which context see my blogpost abovecited.

Judge Wells puts John’s and Judy’s beef about interest on hold pending the final numbers.

So guys, come up with fresh CEDs. Today.

Takeaway– The Devil hasn’t relocated. The Old Boy is still there, in the details. Remember, stipulate, don’t capitulate.


In Uncategorized on 04/21/2016 at 16:37

Whom MFJ hath joined together, AMT credit puts asunder in a saga of first impression, Nadine L. Vichich, 146 T. C. 12, filed 4/21/16.

Years before Nadine’s late husband William became her husband, and while he had another wife, he exercised an ISO that led to AMT. If you don’t know what that means, consider yourself lucky.

Incentive stock options are generally (love that word) taxed, not when exercised, but rather on the difference between option price and gain at disposition. But they’re preference items for alternative minimum tax, and are taxed at FMV of the stock acquired at time of exercise, even when the exerciser gets nothing but the stock.

This is OK if the stock appreciates; the lucky exerciser gets two sets of bases: the basis at exercise (option price), or the FMV on which s/he paid AMT.

What if the stock tanks? “Section 53 allows a taxpayer to claim a credit for AMT paid in prior years, adjusted for specific items.  The credit is limited to the amount by which a taxpayer’s regular tax liability, reduced by certain other credits, exceeds the taxpayer’s tentative minimum tax.  Sec. 53(c).” 146 T. C. 12, at p. 6.

But the unlucky exerciser may not have enough regular tax liability in the year wherein s/he disposes of the now-tanked stock to use the credit. So back in 2006, with amendments in 2007 and 2008, Congress remedied the problem with carryforwards of the credit.

Remember when Congress actually did something? Oh, sorry, I forgot this is a non-political blog.

Well, Nadine’s late husband William didn’t use all his credit while married to his previous wife (with whom he filed MFJ); then he divorced her, married Nadine, merged their finances, filed MFJ, and then died with credit still unused.

Nadine took the remaining credit. IRS disallowed and handed Nadine a SNOD.

Judge Nega asks, what about previous wife? Both IRS and Nadine assume that late husband William owned the whole thing. But when late husband William and previous wife split, there was no Section 53(c) largesse, so there was no credit to split.

Now does the credit belong to Nadine, since late husband William is late husband William?

This is a case of first instance. So Judge Nega analogizes to deductions, although Nadine’s attorneys claim they aren’t the same. Maybe not always, says Judge Nega, but here it’s close enough.

“Marriage affords its entrants certain benefits, among them the option of filing joint returns.  The Code treats married taxpayers who file jointly as one taxable unit; however, it does not convert two spouses into one single taxpayer.  Joint filing allows spouses to aggregate their income and deductions but ‘does not create a new tax personality’. 146 T. C. 12, at p. 12. (Citations omitted).

Whom the Code hath joined together maybe aren’t really together.

“Thus, petitioner and William Vichich remained separate taxpayers even though they merged finances and filed joint returns during their marriage.  And while joint filing may permit spouses to ‘overr[i]de the limitations incident to separate returns’, see Taft v. Helvering, 311 U.S. 195, 198 (1940), it generally does not permit either spouse to inherit or otherwise retain after the marriage ends a tax benefit that was originally conferred upon the other spouse.  This reasoning is supported in both the Code and the caselaw.” 146 T. C. 12, at pp. 12-13.

Judge Nega cites some NOL cases to show that the spouse who incurred the losses is the one who keeps them, and the losses die with that spouse. And Rev. Rul. 74-175, 1974-1 C.B. 52 (which Judge Nega Skidmore’s into this discussion) says NOLs are decedent’s income and go on the final 1040, not on the estate’s 1041.

“While we recognize that the purposes of the AMT credit and the NOL carryover are not identical, we nonetheless find informative the authorities limiting the transfer of NOL carryovers between spouses.  Petitioner offers us no reason not to extend those authorities to this case.  She grounds her claim to the credit in issue entirely in the remedial purposes she alleges underlie section 53(e) and (f).  Those subsections, however, have no bearing on her ability to take into account, for purposes of section 53(b)(1), the adjusted net minimum tax imposed on her husband before their marriage.  Therefore, because petitioner could not deduct for a postmarital year an NOL incurred by her husband even during their marriage, much less before it, we conclude, on the basis of the record and the arguments before us, that, she was not entitled to take into account under section 53(b)(1) her husband’s premarital adjusted net minimum tax liability in computing her own minimum tax credit….” 146 T. C. 12, at p. 16.

I do want to give a Taishoff “Good Try, First Class” to Nadine’s counsel, Stephen L. Kadish, esq., and Matthew F. Kadish, esq. As the golfers say “Never up, never in.”


In Uncategorized on 04/20/2016 at 15:41

Amy Ndiaye Delia had a tough renewal clause in the lease for the shopping mall booth where she ran her hair-braiding operation. Amy wasn’t licensed cosmetologist, so all she could do was braid; her licensed competitors ran full-service operations. So when the 2008 crash brought major economic hurt to her clientele, and a fashion trend turned away from hair-braiding, Amy was hurting.

The landlord insisted on the five-year automatic reboot in the lease, but backed off to three when Amy pleaded poverty. Amy says she kept the shop going to try to offset the rent, and didn’t walk on the lease lest the walk hurt her credit score.

But Amy was a trifle lackadaisical about recordkeeping, so IRS kicked her deductions, and so does Judge Lauber. The IRS also claimed Amy wasn’t in business.

Judge Lauber is more generous. “We regard several of the regulatory factors as neutral in this case.  The only factor that weighs heavily against petitioner is the salon’s persistent history of losses.  Despite that fact, we are convinced that she conducted her hair-braiding business with an actual and honest (if unduly optimistic) objective of making a profit.” 2016 T. C. Memo. 71, at p. 9.

“She credibly testified that this business failed for reasons beyond her control, including the 2008-2010 financial crisis, an over-concentration of similar businesses in her community, and a marked change in taste among her prospective customers.  It might have been prudent for her to have exited this business before she did, but the long-term rental contract posed a serious obstacle. She concluded, not unreasonably, that trying to salvage as much profit as she could was preferable to risking damage to her credit rating by defaulting on her lease commitment.  She closed the business promptly after extricating herself from the lease.” 2016 T. C. Memo. 71, at p. 9.

“She kept business records and undertook marketing efforts that seem reasonable relative to the scale of her activity.  Operating the salon during [the year at issue] was not a source of great personal pleasure or recreation, and it was surely not a ‘sport’ or a ‘hobby.’  Sec. 1.183-2(a), Income Tax Regs.  Although petitioner had a nostalgic fondness for hair braiding, sitting in an empty booth in a shopping mall is not as much fun as (say) riding horses.” 2016 T. C. Memo. 71, at pp. 9-10.

I’ve blogged enough horsey cases to prove that, Judge. Likewise, Amy wasn’t rolling in wealth, so she didn’t need to generate an offsetting loss while having fun.

But her recordkeeping was poor, she tried to write off meals as a business expense with zero backup, so she gets the 20% negligence chop for those expenses.

Takeaway—If your client has a plausible reason for continuing to operate in the face of losses, and isn’t trying to shelter a lot of other income by having fun, go for it.


In Uncategorized on 04/19/2016 at 16:03

David H. Hoffmann and Jerrilynn Hoffmann, 2016 T. C. Memo. 69, filed 4/19/16, but especially David, to whom this little story is dedicated, would have done well to have read my blogpost “What Not To Say,” 11/3/11. Had David done so, he might have profited from the examples of Perry Browning and Viggo (“Wiggy”) Carstensen.

Dave claimed he was running his high-priced private jet for profit, but could show nothing but offsetting losses to his substantial income from other sources.

Judge Halpern walks through the Section 183 factors, and David doesn’t score a hit on any of them; not even a “neutral.”

He could have gotten out of the burdensome lease he signed for his plane when his business was still a highflyer (sorry guys), but claims he never read the lease and thought he was locked in.

But the point of this story is not the fact-specific ins and outs, but rather David on the witness stand.

“Mr. Hoffmann testified that he intended to make a profit from his jet service activity.  He admitted, however, that he ‘wasn’t astute on the recordkeeping’ involved in allocating costs between business and personal use of his aircraft.  He viewed any such allocation as ‘irrelevant’.  Because he ‘owned all the Company’, he said, ‘it really didn’t seem to make much difference to me.’  2016 T. C. Memo. 69, at p. 14 (Two, count ‘em, two, footnotes omitted, but one says David only owned 75% of the Company and no evidence about who owned the rest, and the other says David claims he was concerned not to bill his personal use to the minority owners).

It may not have made much difference to David, and maybe not to the minority owners, but it sure did to IRS.

And it definitely did to Judge Halpern.

Takeaway—Woodshed your client. Thoroughly. Loose cannons belong, if anywhere, only on the gundeck; never on the witness stand.


In Uncategorized on 04/18/2016 at 17:12

I said a long time ago that a blogger is a journalist, and that’s true even of a blogger who limits his coverage to an area as arcane as United States Tax Court.

So today, with only an unsubstantiated deduction T. C. Memo and no designated hitters, I had to dig and keep digging, lest readers in 135 countries be disappointed.

It didn’t sound like much, Michael L. Rakestaw & Kathleen M. Rakestraw, Docket No. 4213-13, filed 4/18/16, known to tax practitioners far and wide as D-Day.

Mike & Kath want to toss their attorney, whom I’ll call Tom. They so move; IRS responds. Exactly what IRS’s response was doesn’t appear, but whatever it was, coupled with Tom’s failure to say anything (even though Judge Chiechi ordered him to bukh, as they say Somewhere East of Suez), Mike’s & Kath’s motion to toss gets tossed.

No mention of impending trial (the usual reason why motions to toss counsel get short shrift, mostly “OK, but try the case your own selves”).

So my curiosity was piqued, and I did a docket search. You never can tell what you’ll find. Well, a year ago, Judge Chiechi entered a stipulated judgment aggregating about $150K against Mike & Kath.

Two months ago Mike & Kath tried to vacate, a wee bit late. And Tom’s response apparently didn’t discuss a lot of what Mike & Kath had to say about Tom’s performance to the satisfaction of Judge Chiechi.

So between IRS’ response (hidden from online public view) and Tom’s nonresponse, Tom is still in, the decision is still unvacated, and I’m left in suspense.

I thought there was a general principle that Tax Court proceedings were to be public.


In Uncategorized on 04/15/2016 at 15:32

STJ Lewis (“What a Great Name!”) Carluzzo has a simple message for his designated hitter, as we ready ourselves for the weekend. See Alan M. Berkun, Docket No. 18437-15L, filed 4/15/16.

IRS wants to toss Alan M.’s petition because he petitioned from an equivalency hearing, and that’s not a Section 6320 or Section 6330 NOD. Alan M. got the equivalency hearing because IRS claimed he hadn’t sent in this Form 12153 to Appeals within the magic thirty-day window after mailing of the NITL, which Alan M. wants to contest.

Six months before the NITL was mailed, Alan M. sent in his Form 1040, showing an address. IRS says it sent the NITL to that address.

Alan M. says that wasn’t his last known address, because he sent in his next year’s 1040 and a letter stating his address was a P. O. Box at Miami Federal Prisoner Camp.

But the NITL was mailed before IRS got that letter. So the previous year’s address was the “last known address.”

STJ Lew: “Generally, a levy notice properly sent to the taxpayer’s last known address by certified or registered mail is sufficient to start the 30-day period within which an Appeals hearing maybe requested, and actual receipt of such levy notice is not a prerequisite to the validity of that notice. Neither the Internal Revenue Code nor the regulations promulgated thereunder define the phrase ‘last known address’. However, this Court has defined the phrase to mean ‘the taxpayer’s last permanent address or legal residence known by the Commissioner, or the last known temporary address of a definite duration to which the taxpayer has directed the Commissioner to send all communications during such period.’ In general, that address will be the address reflected on the taxpayer’s most recently filed Federal income tax return, absent clear and concise notification of a different address. The taxpayer has the burden of proving that a notice sent by respondent was not sent to the taxpayer’s last known address.” Order, at pp. 2-3. (Citations omitted).

But here the letter is not notice of last known address, as it was sent after the NITL had been mailed.

Alan M. is clearly not a happy camper.


In Uncategorized on 04/15/2016 at 14:46

To begin with, I’m not seeking to exculpate the hapless TK, who bore the brunt of STJ Daniel A. (“Yuda”) Guy’s ire at her disregard of his order. See my blogpost “Reopening Slammed,” 4/14/16. She was wrong.

But STJ Yuda hit her a lot harder than any Tax Court Judge I can recall hit any other lawyer who strayed from the strait gate and narrow way.

I’ll proffer just a few examples of what other Judges didn’t call “unethical and unprofessional,” as STJ Yuda termed TK’s deliction.

See the following blogposts: “Channeling Freddie,” 9/16/13, Judge Cohen dealing with Yeff; “The Price of Frivolity,” 3/4/16, Judge Haines dealing with Donny (to whom Judge Haines hands a $12K frivolity chop); “Wilf,” 3/30/15, Judge Halpern being positively douce; and “Do I Hear a Waltz?,” 7/1/12, then-Judge Kroupa dealing (or not dealing, depending upon your point of view; I didn’t think she had, and said so) with an attorney I’ll call SJS.

I invite my readers’ (few though they be) attention to the cited blogposts, and the text of the opinions which they describe.

In none of those cases, wherein attorneys displayed conduct that was worthy of sanctions, whether or not imposed, were these attorneys (all men, must I note?) called “unethical and unprofessional.”

I suggest that a mutual apology is in order.



In Uncategorized on 04/14/2016 at 17:06

STJ Daniel A (“Yuda”) Guy is not a member of the kid-glove school of judge-lawyer relations. “Testy” is hardly strong enough an adjective for the wordprocessor lashing he bestows on hapless attorney TK (it used to be a “tongue lashing” when people spoke to one another; now it’s all electronic).

I use initials or made-up names, as always, when practitioners are involved in an even marginally-negative sense. They’ve suffered enough.

The case was stip’d for a Rule 122 on-the-papers. One week before her opening brief was due, TK moves to reopen the record, stating IRS objects, but nothing happens.

STJ Yuda gives IRS a due date for a written objection. Five days before that due date, TK calls chambers to ask about the due date for TK’s opening brief.

Bad move, TK. And, unlike the celebrated Fort Worth City Councilor’s moving youtube declamation, it doesn’t get better.

“The undersigned’s judicial assistant informed [TK] that ex parte communications with the Court should be avoided and that she should file an appropriate motion related to the filing of petitioner’s brief.” Order, at p. 1.

TK, when you’re told something along those lines, remember the sneaker ad: Just Do It.

TK blows it big time (cringe).

“…petitioner filed an opening brief which includes references to the exhibits that are the subject of petitioner’s pending motion to reopen the record. Petitioner’s brief states in pertinent part that ‘For our purposes, we assume the exhibits [that are subject of petitioner’s motion to reopen the record] were admitted, and that they are now part of the Second Stipulation of Facts.’ On [due date], respondent filed an Opposition to petitioner’s motion to reopen the record and a motion to strike the portions of petitioner’s brief that refer to the disputed exhibits.” Order, at p. 2.

STJ Yuda lays as heavy a blast on poor TK as I’ve seen in many a moon.

“Petitioner’s opening brief includes multiple references to two exhibits that are not part of the stipulated record in this case. Ex parte declarations and statements in briefs do not constitute evidence. Rule 143(c), Tax Court Rules of Practice and Procedure. Suffice it to say, petitioner’s counsels’ conduct in unilaterally treating their motion to reopen the record as having been granted by the Court was both unprofessional and unethical.” Order, at p. 2.

As my elder daughter’s classmate was heard to say years ago, “Oooh, what a diss!”

But STJ Yuda, maybe feeling he placed the aforesaid blast a wee bit too hard, says “Considering all the circumstances, the Court will strike petitioner’s opening brief. The Court will grant petitioner time to file either a motion for leave to submit a proper opening brief or another appropriate motion.” Order, at p. 2. (Footnote omitted, but it says TK can go to trial if she doesn’t like the Rule 122 route.).

And the two exhibits were apparently in the “public domain.”

The order is Ivan Nikolskiy, Docket No. 26163-14, filed 4/14/16.


In Uncategorized on 04/13/2016 at 20:18

The late Clara wanted to keep the family moving company moving in the family. So she has her own trust buy split-dollar universal life insurance policies for the trusts of each of her three sons, so at the death of any of them, the remaining sons could buy out the decedent’s interest.

Big question: Does the economic benefit régime of Reg. 1-61.22 apply? It does if the only benefit to the heirs was the current life insurance cover; the greater of the cash surrender value (CSV) or the total amount of premiums paid had to remain with the late Clara (or her trust) and not go to the sons’ trusts.

Answer (per Judge Goeke): It did. The economic benefit régime applies. But he isn’t deciding whether the late Clara’s trust’s valuation of the CSV in the late Clara’s trust at DoD is correct.

The whole story is found in Estate of Clara M. Morrissette, Deceased, Kenneth Morrissette, Donald J. Morrissette, and Arthur E. Morrissette, Personal Representatives, 146 T. C. 11, filed 4/13/16.

To fund the intrafamily buyouts, the late Clara’s trust poured $29 million into the three sons’ trusts, which bought universal life insurance cover on each son in favor of the other two sons. Universal life means the purchaser of the policy can pay upfront, over time, or stop paying and then start again, a real roll-your-own.

“Under the split-dollar life insurance arrangements, upon the death of the insured the [late Clara’s] Trust would receive a portion of the death benefit from the respective policy insuring the life of the deceased equal to the greater of (i) the cash surrender value (CSV) of that policy, or (ii) the aggregate premium payments on that policy (each a receivable, and collectively, receivables). Each Dynasty [son’s] Trust would receive the balance of the death benefit under the policy it owns on the life of the deceased, which would be available to fund the purchase of the stock owned by or for the benefit of the deceased. If a split-dollar life insurance arrangement terminates for any reason during the lifetime of the insured, the [late Clara’s] Trust would have the unqualified right to receive the greater of (i) the total amount of the premiums paid or (ii) the CSV of the policy, and the Dynasty Trust would not receive anything from the policy.” 146 T. C. 11, at p. 7.

The deal was crafted expressly to comply with economic régime regs, and the sons assigned the policies back to the late Clara’s trust as collateral security for the repayment to the late Clara’s trust of the right to receive premiums paid or CSV. And the late Clara’s trust reported gifts per Table 2001, IRS’ numbers for economic benefit.

IRS claims the whole $29 million was a gift, and loses. The late Clara’s estate claims $7 million, but that’s for another day.

The deal is subject to the split-dollar regs; no dispute there. The outcome depends upon who owns the policy. As each of the sons’ trusts owns the policies on the other sons, it looks like the loan régime is the key.


“As an exception to the general rule, the final regulations include a special ownership rule that provides that if the only economic benefit provided under the split-dollar life insurance arrangement to the donee is current life insurance protection, then the donor will be the deemed owner of the life insurance contract, irrespective of actual policy ownership, and the economic benefit regime will apply. Id. subpara. (1)(ii)(A)(2).” 146 T. C. 112, at p. 14.

Now the preamble to the reg aforesaid distinguishes between the case where all the sons’ trust would get is the current death benefit (less the greater of CSV or premiums paid), and one where sons’ trusts get the death benefit (less the lesser of CSV or premiums paid). In the latter case, there’s excess benefit to the sons’ trusts.

So if the lesser, then loan. If the greater, economic benefit, and that’s only the insurance cover.

Now Tax Court doesn’t really like preambles to regs. They aren’t legislative history, and have little weight. But anyhow, Judge Goeke gives Skidmore deference (one degree above “meh”) to the preamble, even though he goes into the rationale further.

The trusts have no present right to CSV or premiums paid. Whether at death of insured or rollout (pre-death termination), the late Clara’s trust gets it all–greater of CSV or premiums paid.

IRS says that the late Clara’s trust provided the sons would get it all when the late Clara became the late Clara. But, says Judge Goeke, the late Clara’s trust was a revocable trust. The sons’ trusts had no legal right to any of it. And anyway, even when the late Clara became the late Clara, the CSV or premiums paid went into her trust, not to the sons’ trusts, and there was no direction that the trustee pay the sons’ trusts.

And the sons’ trusts had no obligation to pay any premiums. They had the right, but not the obligation. If the late Clara’s trust front-loaded the premiums, that gave the sons’ trusts no greater benefit than the policies provided.

A Taishoff “Good Job, First Class” goes to James Egbert McNair III, Esq., and Kelley C. Miller, Esq., and their colleagues at Reed Smith, counsel for the petitioners.