In Uncategorized on 03/01/2021 at 12:12

Judge Pugh has an illustration of what can, and cannot, be included in a Rule 155 beancount. We know that Tax Court Judges, like most lawyers, eschew arithmetic computations; wherefore, once setting forth the law, they send off IRS and petitioners to do the numbers, with the opinion serving as the frame wherein to pour the numbers, resulting in the decision. Rule 155 is the foundation upon which it all rests.

Here’s Philip N. Rose & Leanna Rose, Docket No. 21436-15, filed 3/1/21. You’ll no doubt remember Phil & Leanna as the people with the safe, whence flowed much cash. If not, see my blogpost “A Little Tin Box,” 6/13/19. Two years ago, Judge Pugh set IRS and the Roses the task of doing the numbers. Finally, two items remained in dispute.

The first, a suspended Section 469(i) loss that the Roses claim IRS didn’t credit them, was credited via Form 8582 (a “back-end” form) and transported to Form 5278, so the Roses got the $8K loss they were entitled to (post phaseout).

The second has to do with the NOL carryforward from the three (count ’em, three) years before year at issue. But as the Roses had no taxable income for the year at issue, any NOL is irrelevant in that year.

“… respondent argues that the amount of petitioners’ proposed NOL carryforward is not only incorrect, but also unnecessary for entry of decision in this case: incorrect because in arriving at the amount of the proposed NOL carryforward petitioners use taxable income as filed rather than as revised in accordance with the memorandum opinion, and unnecessary because in respondent’s words, ‘the amount of petitioners’ * * * [NOL] carryforward is not relevant to the decision document, as the amount of the carryforward is not factored into the Tax Court’s disposition of the issues in this case.’ We note that petitioner otherwise uses the same loss amounts for the Arizona and Idaho properties for the [three “out”] years that respondent includes in his computations. Therefore, petitioners’ objection boils down to whether the decision document itself includes the [year at issue] NOL carryforward amount for use in future tax years. Respondent acknowledges that his computation of petitioners’ [year at issue] NOL carryforward amount is information that will assist petitioners going forward, and has committed to providing that information to petitioners. But respondent argues that it is not required for us to enter decision in this case.” Order, at pp. 2-3.

Well, exactly what should a decision from a Rule 155 beancount include? Judge Pugh agrees with IRS.

“Here, the parties’ computations do not differ as to the amount to be entered as the decision of the Court. Our decision does not include a determination of the amount of any NOL carryforward; while such amounts may be included in decision documents they are not part of the Court’s decision but rather are part of the parties’ stipulations and appear below the Court’s signature.” Order, at p. 3.

The aim of a decision based upon Rule 155 numbers is to compute the tax, add-ons, and chops liabilities for the year at issue. The Judge need not order anything else. The parties of course can stip out other issues. And here, whatever the NOL might be, it wouldn’t change the bottom line for the year at issue.

Judge Pugh won’t wait for IRS to come up with their version of the Roses’ NOL, but will enter decision for what they owe as a result of the 2019 T. C. Memo. I blogged back then.






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