Readers may remember Amanda Iris Gluck Irrevocable Trust, Docket No. 5760-19L, filed 4/8/22, s/a/k/a AIGIT from its appearance two (count ’em, two) years ago in my blogpost “Sue Now, Pay Later,” 5/26/20. Then, IRS lost summary J, so AIGIT got to contest the $48 million capital gain of a partnership (“partnership”) of which AGIT was an indirect partner  through a tiered partnership arrangement, but neither AIGIT’s direct partnership nor AIGIT reported anything about that on their respective returns for the year at issue.

Judge Albert G (“Scholar Al”) Lauber is still on the case, and AIGIT doesn’t get summary J.

AIGIT claims the unreported capital gain was wiped out by the lead partnership’s wipeout, per Section 731. But AIGIT fails to prove it. All AIGIT has is the returns and other filings of the various partnerships, but those are only statements of a claim, not proof.

“Respondent also points to several possible discrepancies in the tax filings petitioners have supplied. [Partnership] did not indicate on its Form 1065 for [year at issue] that the return was the partnership’s ‘final return,’ nor did it check the box, ‘Final K-1,’ on the Schedule K-1…. If [partnership] in fact terminated at year-end…, one might have expected its Form 1065 to have been completed differently. There is likewise no mention in any tax filing that [direct partnership] recognized a loss upon [partnership’s] purported termination. [AIGIT’s partnership] did not report a capital loss on lines 8 or 9 of its Form 1065, and it did not attach any statement identifying a loss or indicating that its accountant ‘netted’ a loss.” Order, at pp. 5-6.

So Judge Scholar Al has a laundry list of fact questions at p. 5, which see if you’re ever involved with liquidating a partnership.

AIGIT’s claim that the allocated capital gain would increase their basis in the direct partnership, thus augmenting the capital loss on dissolution and offsetting that gain, also fails for want of substantiation.

I see AIGIT’s trusty attorney is admitted in Our Fair State. I trust he is busily preparing for trial.