Attorney-at-Law

NO JOY FOREVER – BECAUSE GOLSEN

In Uncategorized on 10/11/2017 at 01:17

All y’all will recall the 1 Cir’s blow-off of IRS and Gordo and Lorna Kaufman, when Lorna’s mortgagee could nick the casualty and condemnation moolah. That wasn’t enough to up-end Gordo’s and Lorna’s façade deduction, said First Cir.

What, you forgot already? Well, see my blogpost “A Joy Forever – Maybe Not,” 7/20/12.

OK, being thus refreshed, know that Obliging Jurist, Judge David Gustafson, he of the victorious dissent in Graev which earned kudos in 2 Cir, refuses to follow 1 Cir around the Chicago Loop in Palmolive Building Investors, LLC, DK Palmolive Building Investors Participants, LLC, Tax Matters Partner , 149 T. C. 18, filed 10/10/17.

Maybe the spectre of Judge Posner of 7 Cir, glaring down on any “loquacity and lame attempts at humor,” to say nothing of daring to cite to a different Cir, frightened Judge Gustafson into the following: “This Court ‘follow[s] a Court of Appeals decision which is squarely in point where appeal from our decision lies to that Court of Appeals and to that court alone.’ Golsen v. Commissioner, 54 T.C. at 757. However, in this case, appealable to a different Court of Appeals, we are not bound to follow this decision of the Court of Appeals for the First Circuit, and we respectfully decline to do so, for the reasons explained herein.” 149 T. C. 18, at pp. 31-32.

Basically, says Judge Gustafson, we were right and 1 Cir was wrong. The Palmolives didn’t get their two mortgagees to subordinate to the easement. The mortgagees had first dibs on casualty and condemnation proceeds. They carefully carved out, in ever so many places in the deed of easement, their rights to the cash ahead of the 501(c)(3) that was supposed to protect, preserve and defend said easement.

So the 501(c)(3) guardian had no present property right superior in all respects to the mortgagees. And neither condemnation nor casualty was so remote as to be negligible, else why all the verbiage carving out the exceptions?

The Palmolives tried to save the carve-outs by claiming foreclosure couldn’t wipe out the 501(c)(3), but that’s not enough. And I agree: a non-disturbance isn’t a subordination. There doesn’t have to be a foreclosure for the mortgagees to grab the cash and leave the 501(c)(3) nothing.

One last try. The Palmolives have a savings clause. If anything jeopardizes the easement, the deed of easement is automatically amended to cut out the offending provisions. But any such automatic amendment is subject to mortgagee approval, thus undoing the amendment just when it’s most needed, and anyway, the 501(c)(3)’s rights have to be fully vested at inception, not sometime later.

With a $33 million deduction up for grabs, will the Palmolives see if Judge Posner is in his usual contrarian mood when confronted with a full-dress T. C., even to so obliging a jurist as Judge David Gustafson? The suspense is killing me.

 

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