No, this is not another of my walks down Memory Lane, to revisit long-extinct SF psychedelic bands, even the one that catapulted to heights of immortality the most tragic of rock heroines. Rather more mundane is the story of David Evan Ushio and Judith S. Ushio, 2021 T. C. Sum. Op. 27, filed 8/16/21, and it sends me off in search of something clear and cold to end a busy blogging day. Especially when the Genius Baristas sealed the whole docket for no discernible reason, so I can’t link to the text of the Sum. Op., even though it is emblazoned all over the Tax Court website for one day only. No wonder I need a drink.

Briefly, Dave and Judy sunk $50K into the stock of something called PCHG, which never earned a sou, but for which stock Dave and Judy claimed Section 1244 small busineshood and an ordinary loss when PCHG cratered.

PCHG was supposed to invest in some kind of three-way deal to produce alternative energy. You figure it out, because it produced nada.

STJ Diana L (“Sidewalks of New York”) Leyden cuts to the cliché.

“Congress intended section 1244 to encourage taxpayers to invest new funds in small businesses, rather than provide favorable tax treatment for losses suffered by investment and holding companies.” 2021 T. C. Sum Op. 27, at p. 8. (Citations omitted).

Section 1244 corporations are supposed to be operating companies, making money from operations, not investing. PCHG never operated anything. Dave and Judy couldn’t prove PCHG got less than $1 million capital.

Moreover, Dave and Judy couldn’t prove “… more than 50% of PCHG’s aggregate gross receipts were not from sources other than royalties, rents, dividends, interests, annuities, and sales or exchanges of stocks or securities. In fact PCHG could not meet this requirement because it did not have any gross receipts during its existence and failed to operate largely as an operating company.” 2021 T. C. Sum. Op . 27, at p. 10.

So Dave and Judy can write off $3K for each of the following seventeen (count ’em, seventeen) years, as capital losses.

I must express sympathy to Dave’s and Judy’s counsel, Sandra M. Robb, EA, USTCP. You were dealt a tough hand to play.