The punchline from a horrific but hilarious example of schadenfreude (the full text of which is manifestly unfit for a blog like mine, intended for family reading), tells the story of Judge David Gustafson, obliging as always, picking out the magic word from Indu Rawat’s motion for reconsideration, in Indu Rawat, Docket No. 15340-16, filed 8/26/21^.

Y’all remember NRA Indu, right? No, she’s not a gunslinger, she’s a Non Resident Alien, who sold her US partnership interest for telephone numbers, and maybe agreed that she had to recognize the post-sale gain on partnership inventory as ordinary income to the tune of $6.25 million. No? Then see my blogpost “Che Se Firms é Perdutto – Part Deux,” 7/20/21.

Indu signed the 870-LT that locked her into recognizing the ordinary gain per Section 751. But of course Indu sold before 11/27/17, so the amendment to Section 864(c)(8), mandating Section 751 pickup by NRAs selling onshore partnership interests doesn’t apply.

Judge Gustafson: “…Ms. Rawat now evidently abandons her critique of the Commissioner’s documents and now agrees (though only arguendo) that the Form 870-LT includes both parts I and II, the Form 886-A, and its ‘Schedule of Adjustments’; and she now abandons her contention that she is ‘not [bound] to any partner-level determinations’.” Order, at p. 3.

Huh? Did Indu surrender to IRS 100%?

Negatory, good buddy, but it takes Judge Gustafson to parse out what Indu’s trusty attorneys are driving at.

“…she asks us to reconsider the meaning and effect of the Form 870-LT in requiring  her to ‘recognize ordinary income in the amount of $6,523,176.’ She contends that this ‘recogni[tion]’ provision in the closing agreement does not determine ‘taxable income’ and does not preclude her contention that the sourcing rules relieve her from taxation on that amount. We think that this contention was unclear in her reply, but we acknowledge
that she made the contention and that we gave it insufficient attention.” Order, at p. 4 (Emphasis by the Court).

The magic word is “taxable.”

So let IRS and Indu dish on their viewpoints, and confabulate via Zoom or phoneathon about settlement.

I’m sure Indu’s trusty attorneys, whom I’ll here denominate as the capdale guys, are grateful.

*Inmdu Rawat 8 26 21