It’s been a couple years (hi, Judge Holmes) since I last visited the anecdote told by the late essayist and raconteur Harry Golden. It was the story of an immigrant who, after many years, finally attained US citizenship. Triumphantly forsaking his native tongue, he spoke only broken English thereafter, affecting to understand no other. Even when his wife would address him in their native tongue, he would turn to his US-born children and ask them “Vot did she set?” Thereupon his wife would bombard him with choice language.

I’m sure Judge Courtney D (“CD”) Jones is far too well-bred to use any such language. But she has the same question as Harry Golden’s new-fledged citizen when it comes to 11 Cir’s celebrated decapitation of IRS’ reading of the Proceeds Regulation, s/a/k/a Reg Section 1.170A-14(g)(6)(ii), improvements-out, prior-claims-in.

Both IRS and Cub Creek Preserve, LLC,  Southern Land Protectors, LLC, Tax Matters Partner, Docket No. 12401-20, filed 2/23/22, want partial summary J. But with chops still on the table, any form of summary J won’t obviate the need for a trial.

Howbeit, Judge CD Jones has the latest silt-stir, the post-Hewitt fallout.

Y’all remember the Coalholders lost on both improvements-out, prior-claims-in. IRS wants a “dission” to like effect for the Cubcreekers. But, while IRS quibbles about the Cubcreekers principal place of business, everyone is betting this case goes to 11 Cir. There’s no stip taking the case out of Golsen. And the Cubcreekers weren’t dealing with improvements, only prior claims.

For those who tuned in late, “prior claims” means that, if the easement is judicially extinguished, prior claims against the servient tenement must come out of any proceeds (like a condemnation or eminent domain award) before the 501(c)(3) protector gets anything.

So vot (sorry, what) did 11 Cir mean when they shot down IRS’ reading of the Reg?

“Though the motions before us address the prior claims provision, not a donor improvements provision (as the deed does not appear to contain a donor improvements provision), respondent’s position is based primarily on his assertion that the prior claims provision fails to satisfy the requirements of Treas. Reg. §1.170A-14(g)(6)(ii). It is not entirely clear at this time whether the Eleventh Circuit invalidated Treas. Reg. §1.170A-14(g)(6)(ii) in its entirety, or whether the court invalidated that regulation only insofar as it is interpreted to disallow deductions based on carve-outs for improvements. We also note that the validity of Treas. Reg. §1.170A-14(g)(6)(ii) remains pending before the Sixth Circuit. See Oakbrook Land Holdings, LLC v. Commissioner, No. 20-2117 (6th Cir. Oct. 16, 2020). Under these circumstances, we conclude that summary judgment based upon an application of Treas. Reg. §1.170A-14(g)(6)(ii) to the prior claims provision would be inappropriate.” Order, at p. 4.

Oh, what a lovely silt-stir.