In Uncategorized on 04/19/2018 at 17:33

My colleague Peter Reilly CPA took his cue today from a very exalted source to “smite me with friendly rebuke” for having missed Summa Holdings, Inc., 2015 T. C. Memo. 119 filed 6/29/15. Mr Reilly has noted in his blog on that both 1 Cr and 2 Cir are dealing with appeals, and 6 Cir has tossed IRS. The prevailing view on appeal is that economic substance is not a smell test.

I responded that when Summa came down, a variation on the DISC-stuffs-Roth gambit, I viewed it as “much of a muchness with the other blown-up DISC-to-Roth cases, like Mazzei and Ohsman.”

And the facts in Summa pre-date the codification of economic substance in the still-unrepealed Affordable Care Act.

So if the statement that “if there’s a problem Congress should fix it” is what tosses IRS, we have yet to see whether Congress did fix it in 2010.

Thanks as always to Mr Reilly.

  1. Thanks for the response. BTW First Circuit also ruled against IRS, but there is a dissent.

    I don’t know that the codification of economic substance would change the result in Summa since DISCs are deliberately non-substantial.


  2. Mr Reilly, thank you for the correction. Perhaps my blogpost was unclear. As the DISCs no longer exist as such (having been replaced by FISCs), what remains of those cases is strictly what I call “pipeline,” that is, old cases from years ago working their way through the Tax Court digestive tract. Therefore, in all, or almost all, of such cases, the 2010 codification will play no part, as the facts and law prevailing predated the codification. It remains to be seen if the Summa progeny carry over beyond the final DISC-to-Roth case, or if the codification does as was suggested in 6 Cir, let Congress fix it.


  3. Further to the foregoing, I did mention the 6 Cir toss in the Summa Holdings, Inc., case in my blogpost “Whacking Roth,” 7/18/17, en passant, agreeing with Judge Holmes and 6 Cir that the DISC-to-Roth cash-stash was a special case of unguided Congressional largesse.


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