In my real estate practicing days, it was an unceasing mantra: “It’s all about the numbers.” “How much are we talking about?” “What’s the bottom line?” “What’s the downside?”

Well, even a Cambridge-educated classicist like Judge Albert G (“Scholar Al”) Lauber reverts to the basic question in Adams Challenge (UK) Limited, Docket No. 4816-15, filed 8/9/21*. Y’all will recall the Adams Challengers, right? What, no?

The Adams Challengers never left well enough alone. Their job was to find extinct oil and gas wells on the US Outer Continental Shelf, decommission them and dig up hurricane-damaged detritus. Section 638 plays Laocoön with the Adams Challengers in the US tax web; see my blogpost “‘Related To,’ ‘In Connection With,’ “With Respect To”, 1/8/20.

Now all that’s left is what I left at the foot of my blogpost above-cited. “…any deductions or credits allowable to Challenge must await another day.” The Adams Challengers and IRS were working towards that end, when the Adams Challengers ask Judge Scholar Al to hold everything while they talk to the UK Competent Authority about a mutual agreement procedure.

A MAP here asks the UK taxing authorities to shield the Adams Challengers from a double whammy if they lose in Tax Court and have to pay US income tax; then the UK won’t tax the Adams Challengers twice.

The UK CA says they’ll confabulate with the US CA only if Judge Scholar Al stays the proceedings, or, if not, when any US decision becomes final, per Section 7481.

Judge Scholar Al says he won’t stay the proceedings.

Article 26 of the US-UK tax treaty says a national can go to their own CA within three (count ’em, three) years of assessment, or accepted closing agreement, or final resolution of litigation, including appeal.

“Petitioner declined to submit a competent authority request within three years of receiving the notice of deficiency…. Instead it opted to commence litigation in this Court, where its case has been pending for more than six years. In case like this–where the taxpayer initially chooses litigation over mutual agreement proceedings–the competent authority procedure will function most efficiently if the taxpayer pursues its litigation to a final decision under I.R.C. sec. 7481(a), i.e., to the point where ‘such [litigation] is finally resolved, including any appeal.’ IRS Announcement 2007-107.” Order, at p. 3.

The real question for the UK CA is whether the UK needs to do something for the Adams Challengers, if they don’t owe the US anything.

“Before affording such relief, the U.K. will presumably want to know whether petitioner actually is liable for U.S. tax, and to what extent. That determination will depend on the outcome of any appeal taken by petitioner from our ultimate decision in this case. The U.K. will have no need to consider petitioner’s request, at the expense of its revenue, if an appellate court reverses our decision.” Order, at p. 3.

Since the Adams Challengers claim to be in the home stretch working out the numbers, stopping now saves nobody anything.

“Resolution of the remaining (mainly factual) questions, combined with petitioner’s likely appeal of the legal issues to a final decision, will enable the U.S. and U.K. Competent Authorities to conduct any future mutual agreement proceeding with knowledge of what petitioner’s U.S. tax liability actually is. Petitioner will suffer no prejudice by exhausting its litigation remedies in this way, because it will have three years after our decision becomes final to seek Treaty relief.” Order, at p. 4.

So finish the numbers, guys, and get ready for the appeal.

*Adams Challenge UK 8 9 21