In Uncategorized on 01/04/2022 at 16:22

The recent flurry of correspondence and commentary anent 11 Cir’s reining in of IRS’ and Tax Court’s Procrustean reading of Reg. Section 1.170A-14(g)(6)(ii), including without limitation whether or not 11 Cir invalidated the Reg Section altogether, is not surprising; I’m not sure what the following means.

“After careful consideration of the agency record before us, the several opinions in Oakbrook and precedent from the Supreme Court, and this Court’s interpretation of procedural validity under the APA, we conclude that § 1.170A-14(g)(6)(ii)—as read by the Commissioner to prohibit subtracting the value of post-donation improvements to the easement property from the proceeds allocated to the donor and donee in the event of judicial extinguishment—is arbitrary and capricious under the APA for failing to comply with the APA’s procedural requirements and is thus invalid. See §§ 553(c), 706(2)(A).” Hewitt, at p. 28.

What’s invalid? The Reg, or the Com’r’s reading of the Reg to require improvements-in?

I’m not entirely sure the Court answers the question at p. 36: “Because Treasury, in promulgating the extinguishment proceeds regulation, failed to respond to NYLC’s (New York Landmarks Conservancy] significant comment concerning the post-donation improvements issue as to proceeds, it violated the APA’s procedural requirements. See Lloyd Noland, 762 F.2d at 1566; see also Oakbrook, 154 T.C. at 225–27 (Toro, J., concurring). We thus conclude that the Commissioner’s interpretation of § 1.170A-14(g)(6)(ii), to disallow the subtraction of the value of post-donation improvements to the easement property in the extinguishment proceeds allocated to the done, is arbitrary and capricious and therefore invalid under the APA’s procedural requirements. Accordingly, we reverse the Tax Court’s order disallowing the Hewitts’ carryover charitable deductions as to the donation of the conservation easement and remand for further proceedings.”

OK, so I include a tip of my battered Stetson to Judge Emin (“Eminent”) Toro for his persuasive reasoning.

Today we have a fresh reading on Treasury’s insouciant dealing with statutes. Judge Kathleen Kerrigan looks to be ready to toss Reece David Simmons, Docket No. 14352-20S, filed 1/4/21, no matter what. But her order throws a curious post-Hewitt shadow.

“The date of the notice of deficiency underlying this proceeding indicates a statutory deadline for filing a petition pursuant to section 6213(a) of the Internal Revenue Code (I.R.C.) that expired on May 11, 2020, which would have been extended to July 15, 2020, per I.R.S. Notice 2020-23. Conversely, the envelope in which the petition was received bears postage dated December 3, 2020.” Order, at p. 1.

When IRS Notice 2020-23 was first issued, I tangentially speculated whether a Notice could override an explicit statutory directive; see my blogpost “Le Quinzième Juillet,” 4/10/20, as edited. Of course, that argument is of no use to R.D. Simmons, unless the 12/3/20 mailing included an envelope with an earlier postmark that was returned during the Tax Court shutdown.

IRS could argue that Treasury’s Notice did not override the statute. The Notice only stated, somewhat elliptically, that IRS would not interpose the Section 6213(a) jurisdictional defense in any pandemic-related case. And indeed, Judge Kerrigan notes that IRS made no jurisdictional motion in this case.

But Judge Kerrigan wants the parties to show cause why she should not toss R. D. Simmons anyway.


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