No, not a misspelling of the Mozart-Da Ponte classic. This is about what almost all charities do almost all the time when they get gifts of closely-held corporate stock…they redeem the stock with the corporation for cash to fund their charitable operations, because there is no public market for closely-held stock.

But IRS claims that what Fidelity Investments Charitable Gift Fund (Fidelity) did with the closely-held corporate stock Jon Dickinson and Helen Dickenson, 2020 T. C. Memo. 128, filed 9/3/20, donated to Fidelity was really Jon’s  sale of his stock to the corporation (triggering taxable gain), and then a charitable donation of the cash he got thereby. That’s because as soon as Jon donated the stock to Fidelity, Fidelity promptly redeemed the stock with the issuing corporation. Of course there was paperwork by Jon and the corporation approving the transfer of stock to Fidelity, stating the Fidelity could do whatever it wanted with the stock, no strings attached, and Fidelity is a legit 501(c)(3). IRS claims “nudge nudge, wink wink, say no more,” of course Fidelity was going to redeem.

Yes, but.

Judge Travis A. (“Tag”) Greaves says caselaw is clear: the donor must part with the shares completely before the stuff gives rise to income by way of sale.

On the first part, IRS has to show specific facts that Jon didn’t part with the stock completely. All IRS had was that Fidelity always redeemed closely held stock. Judge Tag: “…a preexisting understanding among the parties that the donee would redeem donated stock does not convert a postdonation redemption into a predonation redemption. Furthermore, neither a pattern of stock donations followed by donee redemptions, a stock donation closely followed by a donee redemption, nor selection of a donee on the basis of the donee’s internal policy of redeeming donated stock suggests that the donor failed to transfer all his rights in the donated stock.” 2020 T. C. Memo. 128, at p. 7. (Citations omitted).

Next, income by way of sale raises the question of assignment of income. Deals that move one party’s income to another (always a tax-indifferent or lower rate of tax) are taxable to the mover, not the movant. But the redemption has to be nearly certain, so that there’s income to assign. There was no plan of liquidation in place, and no corporate resolution allowing Jon to redeem when he made the gift to Fidelity.

“The parties point us to Rev. Rul. 78-197, 1978-1 C.B. 83, a “bright-line” rule… which focuses on the donee’s control over the disposition of the appreciated property. This Court has not adopted Rev. Rul. 78-197 as the test for resolving anticipatory assignment of income issues, …and does not do so today. The ultimate question… is whether the redemption and the shareholder’s corresponding right to income had already crystallized at the time of the gift. Regardless of whether the donee’s obligation to redeem the stock may suggest the donor had a fixed right to redemption income at the time of the donation, …respondent does not allege that petitioner husband had any such right in this case. Accordingly, respondent’s resort to Rev. Rul. 78-197, supra, is unavailing.” 2020 T. C. Memo. 128, at pp. 9-10. (Emphasis by the Court). (Citations omitted).

Judge Tag doesn’t consider legislative intent (see my blogpost “Settlements,” 8/31/20), so why should he consider Rev. Rul.s?

Taishoff says of course there was a deal to redeem in advance. The charity needs to do its charitable thing, not hold stock in a closely-held for which there is no public market. Since there is no public market, the charity has no choice but get the stock redeemed for cash. And closely-held corporations are closely held to keep the good stuff for the insiders, who don’t want charities with boards of trustees checking out the cookie jar for insider fingerprints. And heavy-hitting insiders in closely-helds who need a quick charitable write-off to offset a big capital gain when the closely-held goes public can do a sale-and-gift mix-and-match, selling some stock and giving away some.

Whatever, IRS loses summary J.

My esteemed colleague and delightful luncheon companion (whom this pandemic prevents me from joining for lunch in his hometown), Peter Reilly, CPA, has suggested that my blogposts have become too elliptical. A schoolmate of his (and presumably of Judge Albert G (“Scholar Al”) Lauber) said my blogposts used too many obscure terms.

I reminded Mr Reilly of my blogpost “Maybe Not So Obvious – Part Deux,” 1/22/15, but that’s now so long ago that a refresher is called for.

As I said back then, no readers need play guessing-games here; Tax Court and tax law are sufficiently obscure.

So here’s a brief glossary of terms and abbreviations, with more to follow if time (and reader interest) permits. And if some items are really obvious, I nevertheless include them because, as G. M. Fraser once remarked, “someone, somewhere, is sure to clamor for enlightenment if I don’t.”

Appeals – Internal Revenue Service Independent Office of Appeals. See https://www.irs.gov/appeals/appeals-an-independent-organization

CAP – Collection Appeal Process. Like a CDP (see below), but no Tax Court review.

CDP – Collection Due Process hearing. See 26USC§6320 and 26USC§6330.

CFR – Code of Federal Regulations. All the published regulations of Federal Administrative Agencies. Available online from http://www.law.cornell.edu

Ch J – Chief Judge

Chops – Penalties, e.g., Sections 6662s, 6663, 6694.

CPA – Certified Public Accountant. For my non-US readers, the equivalent of a Chartered Accountant.

CSTJ – Chief Special Trial Judge. Section 7443A.

Designated Hitter – A Tax Court designated order. For more details, see https://www.ustaxcourt.gov/InternetOrders/TodaysOrders.aspx

EA – Enrolled Agent. See 31CFR§10.4.

EE – Employee.

“Elevenses” – United States Circuit Court of Appeals for the Eleventh Circuit.

FRCP – Federal Rules of Civil Procedure. Available online from http://www.law.cornell.edu

FRE – Federal Rules of Evidence. Available online from http://www.law.cornell.edu

Glasshouse – United States Tax Court courthouse, 400 Second Street, NW, Washington DC 20217

Glasshouse Gang – Those stationed at The Glasshouse

IC – Independent contractor.

NFTL – Notice of Federal Tax Lien.

NITL – Notice of Intent to Levy.

NOD – Notice of Determination. Usually from Appeals after a CDP or equivalent hearing, but can come from Whistleblower Office (the “Ogden Sunseteers”) determining a whistleblower claim. Sometimes also from revocation of 501(c)(3) status, worker classification, or disqualification of retirement or deferred compensation plans.

Off-the-bencher – A Tax Court opinion rendered from the bench after hearing. See 26USC§7459(b). The transcript of the Judge’s oral remarks is the opinion (or order and decision).

Ogden Sunseteers or OS – Personnel of the IRS Whistleblower office, located in Ogden, UT, who deny applications and  watch the sunset.

Partitive Genitive – A syntactical form carried over from Latin, where one shows an object as a part of a greater whole, as in “a cup of coffee”, “a couple of rounds of briefing”, etc. Much derided by His Honor Judge Mark V. Holmes

Reg – Regulation. Usually Treasury Regulation. See CFR above.

Reg. Section – Specific provision of CFR.

Rounder – A frequent Tax Court litigant. May or may not be found by the Court to make protester or frivolous arguments. IRS periodically publishes notices setting forth what it defines as frivolous arguments. Seer wits, wags and wiseacres, infra.

RTRP – Registered Tax Return Preparer. One who qualified under the now-extinct Shulman-Williams registration regime, abolished by Loving v IRS, No. 13-5601, USCADC.

Section – The Internal Revenue Code, Article 26 United States Code.

“Small Court” – United States Tax Court, but may be used for inferior courts created by Congress under US Constitution, Art. 1, s. 8.

SNOD – The Statutory Notice of Deficiency, also known as the “ninety-day letter” or “ticket to Tax Court”.

SOL – Statute of Limitations. There is none for nonfiling or fraud. For others, there are three-year and six-year SOLs, which I abbreviate 3SOL and 6SOL.

State Abbreviations – I use the United States Postal Service version, e.g., CA for California, AZ for Arizona.

STJ – Special Trial Judge. Section 7443A.

Summary J – Summary judgment. Judgment on the law without need for a trial, as no material facts are disputed. See FRCP§56 and Tax Court Rule 121. There is a précis on the Tax Court website: “What is a motion for summary judgment? How should I respond to one?” https://ustaxcourt.gov/petitioners_start.html?s=summary&r=3051#START39

TAS – Taxpayer Advocate Service. See https://www.irs.gov/advocate/the-taxpayer-advocate-service-is-your-voice-at-the-irs

The Hill Far Above – Location of Cornell University Law School.

The Supremes – United States Supreme Court. Sometimes also USSC.

USCA – United States Circuit Court of Appeals.

USCFC – United States Court of Federal Claims.

USDC – United States District Court. Usually followed by State (or District or Commonwealth or Territory) designation, and geographical designation, if any, i.e., E (Eastern), W (Western), N (Northern), S (Southern), or M (Middle). Thus, I’d write United States District Court for the Middle District of Tennessee as USDCMDTN, and United States District Court for the District of Rhode Island as USDCDRI.

USCAFC – United States Court of Appeals for the Federal Circuit.

UPS – United Parcel Service.

USPS – United States Postal Service

Wits, wags and wiseacres – Aspirants to, or candidates for, Rounder status, but not yet elevated thereto.

I award various titles to litigants for their maneuvers on a purely arbitrary basis. Examples are Taishoff “Good try” of various classes, Taishoff “Good job” for winners,  and Taishoff “Oh Please,” the last for extremely feeble arguments and maneuvers.

I introduce editorial comments with “Taishoff says.”

The Tax Cuts and Jobs Act of 2017 made alimony nondeductible to the payor and non-taxable income to the payee. But pre-2018 divorce agreements continue unchanged while unmodified (in which event further hoops must be jumped through), so Michelle L. Romanowski, Docket No. 15816-19S, filed 9/2/20, may yet be relevant.

Both Michelle and IRS want summary J. Neither gets all of it, but Michelle gets tossed, while IRS only gets some. Thereby hangs the tale.

IRS first stung Michelle’s loved-once with a deficiency, but he showed expenses paid per the temporary maintenance order. So IRS gave Michelle a SNOD, as she reported nothing.

Michelle’s loved-once made mortgage payments on family home that he vacated. But since Michelle claims she never saw loved-once’s numbers, she’s raised a question of fact. Loved-once claimed the interest deduction on his return, as well as claiming it as part of  the alimony he paid. Nice try. So calculating which was what is a question of fact. As for paydown of the mortgage, that secured Michelle’s dwelling, so she got a benefit. And since she and loved-once held title as husband and wife, by State law (NY) her interest in the family home ceases at her death, so further payments not for her benefit, satisfying Section 71(d).

Utilities for the family home, even though billed to loved-once, benefit Michelle, so they’re in. So are the lease payments on the Land Rover for the months she had it.

Unallocated cash payments are taxable to Michelle.” We have previously rejected the argument that unallocated support allocations are not alimony because they could be part of the payor’s child support obligations under State law. See Berry v. Commissioner, T.C. Memo. 2005-91, 2005 WL 950117, at *14; see also Okerson v. Commissioner, 123 T.C. at 264 (holding that whether the document characterizes a payment as alimony ‘has no effect on the consequences of that payment for Federal income tax purposes.’) (quoting Hoover v. Commissioner, 102 F.3d 842, 844 (6th Cir. 1996), affg T. C. Memo. 1995-183). And petitioner does not allege that Mr. Romanowski did not make these payments. Based on the undisputed facts before us, we conclude that the semi-monthly payments were taxable alimony payments.” Order, at p. 4.

Health insurance payments were made for both Michelle and kids, but the evidence shows only lump-sum, so question of fact which payments benefited only Michelle.

The Court-ordered professional evaluation fees (probably for determining child custody) are neither alimony, nor income to Michelle, nor deductible.

So the unallocated payments, the Land Rover lease rent, and utilities are in as alimony, and presumably deductions for love-once. Mortgage payments and health insurance are questions of fact. Professional evaluation fees are out both ways.

Does payee benefit is the question.

A commentator from The Land of the Conservation Easement lamented the long delay in a case I blogged only yesterday under the caption “Let the Spinnin’ Wheel Spin,” 8/31/20. The commentator remarked that the case involved one MFJ 1040 return for a single year, and once the Sub S and LLC were disposed of, the issue was simple.

What price the syndicated (or maybe not syndicated) conservation easement, the commentator asked, with multiplex taxpayers with multiple entities, documents by the terabyte, appraisals, dueling experts, et hoc genus omne? Will these cases be the new Jarndyce v Jarndyce?

Far be it from me to condone dilatory tactics on any side. Justice delayed is justice denied, and the old cry “There’s no difference between ‘some day’ and ‘never'” is as true today as sixty years ago.

But a brief review of the facts in the case I blogged via a docket search shows that the petition was filed six (count ’em, six) years after the year at issue, and the SNOD issued only after two attempts by IRS to settle per Announcement 2005-80, both of which taxpayers rejected. The SNOD followed only as the SOL was about to run, with no Form 872 or any other extender in sight.

There were voluminous exhibits on the trial. See Sean L. Daichman and Linda E. Daichman, Docket No. 14368-15, filed 8/31/15.

Finally, there were five (count ’em, five) volumes of pretrial and trial transcripts, compiled over two days.

So given that the petition hit five years after the audit, a nine-month pretrial continuance agreed to by both sides, and a two day trial to sort this out, the time lag wasn’t as bad as the commentator suggests.

As my late law partner Sid (may he rest in peace) would grunt between his cigar-laden teeth when confronted with delaying tactics, “Select or settle or get out.” He meant either select a jury, settle the case, or go home.

Maxwell Anderson, thou should’st be living at this hour, because, as he wrote, “the days grow short when you reach September/ When the autumn weather turns the leaves to flame/One hasn’t got time for the waiting game.”

Today STJ Diana L. (“The Taxpayer’s Friend”) Leyden is confronted by a masterpiece of IRS computerbabble, which seeks to prove that Boss Hossery is under the radar in Gregory Parker, Docket No. 1416-20S, filed 9/1/20, because AUR (CP2000), therefore electronic.

Wherefore neither has STJ Di got time for the waiting game, especially when IRS responds with the following after more than three (count ’em, three) weeks since STJ Di asks them for the Boss Hossery behind the chops wherewith they seek to slug Greg.

“Respondent attached as Exhibit A to his status report a copy of the Case History Transcript dated ’08/12/2020′. This Case History Transcript indicates an action of ‘IRS RECD’ dated “01/24/2020″ and includes the following information: under ‘CODE’ is the number 75, under ‘USER’ is the number 19B878, under ‘INPUT DATE’ is 10/17/2019, which date was before the notice of deficiency and after the date of the CP2000.” Order, at p. 1.

IRS has a week to put this into English.