Wendell C. Robinson & May T. Jung-Robinson, Docket No. 6446-19L, filed 4/11/22, are back, following the off-the-bencher Judge David Gustafson gave them back in January, for which see my blogpost “Don’t Debate, Abate,” 1/10/22.

But Wendell & May still want to debate, so Judge Gustafson shuts them down.

“Neither the ‘computation’ nor the memorandum submitted by the Robinsons contains a computation of their ultimate liability as determined by our bench opinion. Instead, the Robinsons explicitly attempt what Rule 155(c) flatly forbids: They ‘seek modification and reversal of the Court’s decision, based on Petitioner’s [sic] belief that the Court’s decision is based on a mistake of fact and law’. The Robinsons attach various exhibits (all of which were previously admitted into evidence) to support their argument that the Court should adopt the calculations in their original …. return.” Order, at p. 5.

Rule 155s are strictly beancounts, not reargument, reconsideration, or renewal. If you’re at a Rule 155, it’s only the numbers.

But IRS’ numbers are wonky.

“Our opinion… held that the Robinsons are liable for the section 6651(a)(2) addition to tax on $35,637 (the amount of unpaid tax liability reported by the Robinsons…), and we are unable to determine why the Commissioner calculated the section 6651(a)(2) addition to tax using $40,794.31 instead of $35,637. We will order him to show cause why this should not be corrected.” Order, at p. 6.

Takeaway- Don’t treat Rule 155s as routine. Drill down on the opinion that sends you to the Rule 155. Don’t expect the Court to rubberstamp your numbers. Doublecheck IRS’ numbers.

Don’t debate, calculate and recalculate.

No, I haven’t taken on the role of war correspondent. One of my correspondents, Peter Reilly, CPA, backed by the inexhaustible resources of the Forbes empire, sends me 4 Cir’s reversal of the case of Vitaly Baturin, a Russian scientist who claimed exemption from US income tax on the $75K he got from Thomas Jefferson National Accelerator Facility, a USDOE facility where he was boosting their atom-smasher from 6Bev to 12Bev to unravel the source of the universe.

Here’s Baturin v Commissioner, No. 20-1648, 4/6/22.

For the backstory on Vitaly, see my blogpost “Only Be Sure to Call It Please Research – Part Deux,” 12/18/19.

Judge Motz says the US – Russian Federation Tax Treaty is less generous than the old deal with the now-defunct USSR. Anyway, treaties must be liberally construed in favor of the contracting parties, not the claimants thereunder. Grants and wages are two separate categories, whose separation must be maintained. US law governs, and Section 117 only helps Vitaly when the Jeffs get no benefit from his work.

True, the money was allocated before Vitaly ever came on the scene, but that doesn’t matter if the Jeffs got the benefit of his work.

Judge Motz at 4 Cir, though reversing, gives pore l’il ol’ Tax Court the benefit of the doubt.

“The Tax Court, of course, did not have the benefit of our decision when it heard testimony and decided this case. As a result, the record is not entirely clear as to the specifics of Dr. Baturin’s relationship with Jefferson Lab. We are not a fact-finding body, and the question of how best to characterize the payments at issue here is a largely fact-dependent question.

“Thus, on remand, the Tax Court should determine what Jefferson Lab gained from having Dr. Baturin on staff. In doing so, the court should consider, for example, the following questions: If not Dr. Baturin, would Jefferson Lab have brought someone else to work on upgrading the detector? Did the projects Dr. Baturin worked on pre-and/or post-date his tenure at Jefferson Lab, or were they dependent on his presence? Did Jefferson Lab retain the rights to the product of Dr. Baturin’s research? How much discretion did Dr. Baturin have to direct the day-to-day performance of his work? Cf. Rev. Rul. 80-36, 1980 WL 129605, *1 (outlining relevant considerations to determine whether researchers’ income was tax-exempt under U.S.-Japan Income Tax Convention). In short, was there a ‘substantial quid pro quo’ here? We trust the Tax Court to answer these questions, and we think it appropriate to allow that court the opportunity to apply the framework we have described here in the first instance.” Opinion No. 20-1648, at pp. 15-16. (Citation omitted).

Looks like grants are gifts, disinterested love and affection, not payment for services. To Russia with love?

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.

In criminal proceedings in Our Fair State, when this red “E” lights up, it means a tribunal has made an error so grave that it totally undermines its findings, so that even without objection by the injured defendant or their counsel, even when right of appeal is waived, the findings must be tossed.

OK, but our courts are armed cap-à-pié with the full judicial power of Our Fair State. What can pore l’il ol’ Tax Court do?

That Obliging Jurist Judge David Gustafson would like to know, and in pursuance thereof, he’d like IRS and Tatsuya Kito, Docket No. 20174-19L, filed 4/7/22, to tell him.

Tats petitioned six (count ’em, six) years’ worth of NODs from a NITL and a NFTL; sent in an OIC which got bounced. Tats’ OIC included years not in the NITL or NFTL, but that’s OK. Judge Gustafson has the cases; you can even throw in TFRPs. At every stage, Year X was included in the proceedings.

Except the NOD from the NITL, which only discusses the six years petitioned, reviews seven (count ’em, seven) years, throwing in one not petitioned, but provides a chart on Page One showing only five (count ’em, five) of petitioned years, but leaving off Year X. Appeals decides Tats can pay in full, so no CAlt. (CAlt stands for collection alternative, not to confuse with abbreviation for California).

Tats then files his petition (not specifying which years are involved but attaching the NOD), and seeks remand for change-of-circumstances. The Supplemental NOD only addresses the five years, sustains the collection.

Then Tats and IRS send in a stipulated decision including Year X.

Judge Gustafson bounces it. Pore l’il ol’ Tax Court’s jurisdiction is straitjacketed.

“Strictly speaking, we do not review the IRS’s collection notices (i.e.,  neither the notice of lien filing (which included Year X) nor the proposed levy (which did not)); rather, we review IRS Appeals’ determination as to those collection notices. If IRS collection personnel filed a notice of lien for Years 1 and 2, but (when that collection became the subject of a CDP hearing) IRS Appeals sustained the lien as to Year 1 and did not reach Year 2, then the Tax Court’s jurisdiction in a subsequent case under section 6330(d)  extends only to Year 1 and does not extend to the year as to which IRS Appeals made no determination.” Order, at p. 4.

IRS asks Judge Gustafson to decide that Appeals did make a determination as to Year X. Just a mistake in the paperwork.

No go.

“IRS Appeals’ multiple explicit statements of the periods as to which it was making a determination is the best evidence of the extent of its determination. To go beyond the literal language of the determinations (arguably, to contradict it) sets us on a most uncertain path, whereas we ought to entertain jurisdiction only where it has been plainly conferred on us. We begin with the presumption that the notices mean what they repeatedly say. This is most weighty.” Order, at p. 4.

Judge Gustafson cannot find even an implicit decision. Neither petition nor answer specified years at issue. “The original and supplemental notices simply refer to the CDP requests; they do not mention, even glancingly, that the CDP requests included [Year X].” Order, at p. 5. Judge, I think you meant “tangentially.”

Howbeit, the OIC was bounced, right? And it mentioned Year X, right? But as hereinabove stated (as my expensive colleagues would say), you can throw anything you like into an OIC. Appeals can only consider what the NOD says. Tax Court can only review the NOD itself.

And now we come to mode-of-proceedings. IRS claims harmless error, as prosecutors do when they or the court blew it. But Judge Gustafson applies our good NY learning.

“The harmless error rule ‘is to be used only “when a mistake of the administrative body is one that clearly had no bearing on the procedure used or the substance of decision reached.”‘ Romano-Murphy v. Commissioner, 152 T.C. 278, 311 (2019) (quoting U.S. Steel Corp. v. EPA, 595 F.2d 207, 215 (5th Cir. 1979)). Here, however, the error (if it was an error) had a definite ‘bearing’ on the ‘substance of [the] decision’, leaving unclear the critical question whether a particular year was in fact addressed in the determination.

“In this case it is not at all implausible to suggest that IRS Appeals may have meant to include [Year X] in its determination, or that IRS Appeals would have included [Year X] if it had noticed it, or that IRS Appeals intended to add [Year X] but failed to do so, or that IRS Appeals obviously ought to have done so, as efficiency, coherence, and good government would require. But these plausible suggestions do not tell us what IRS Appeals actually did determine.” Order, at p. 6.

For Romano-Murphy, see my blogpost “Assessment First, Determination Afterward,” 5/19/21.

OK, so Tax Court is out of it for Year X. So what to do?

“Perhaps, since the parties are not bound by our jurisdictional limits, they can reach an agreement that could be stipulated–even in the portion of the proposed stipulated decision document below the judge’s signature line. See Hill v. Commissioner, T.C. Memo. 2021-121, at *18. Or perhaps a second remand could be undertaken to allow IRS Appeals to issue a supplemental determination that addresses petitioner’s CDP request as to [Year X] (which remains pending if, as we hold, no determination for that year has yet been made). Or there may be superior alternatives.” Order, at p. 6.

For Hill, see my blogpost “Three Point Play,” 10/25/21.

For Tats and IRS, talk among yourselves.

There’s no doubt Steven W. Webert and Catherine S. Webert, T. C. Memo. 2022-32, filed 4/7/22, only lived in their dream house for one year, then rented it, and didn’t sell it for another ten (count ’em, ten) years. Their MFJ 1040s for the subject years all told the same story.

But what the 1040s didn’t tell was Catherine’s battle with cancer, and the astronomical medical bills that her treatment generated. When the home equity line of credit failed to cover, they tried to sell, but the Black ’08 was upon them. The upshot is a $237K deficiency, but part of that is the $194K capital gain on the sale.

Catherine concedes IRS’ summary J motion to disallow the Section 121 principal residence exclusion, but Steve doesn’t. They divorced the year after sale, and Catherine wants innocent spousery.

Judge David Gustafson will always try to find a way when he hears a truly sad tale.

IRS gets summary J that Steve and Catherine fail to meet the two-out-of-five-years-preceding-sale use and occupancy tests of Section 121. Steve’s vague claim otherwise is torpedoed by the 1040s and Schedule E rental info they filed.

But what about Reg. Section 1.121(b)(3) sale-by-reason-of-health outs?

“During the period at issue, it is clear that the Weberts suffered many unfortunate and prolonged difficulties. They are not mentioned in the Commissioner’s motion…; they are alluded to in Mr. Webert’s response…; and in Ms. Webert’s response, those problems and their effects are described in some detail in an attachment … to her Form 8857, “Request for Innocent Spouse Relief”, which was signed under penalty of perjury. It seems clear that Ms. Webert ’s health was both a cause of the need to move from the Mercer Island house and a precipitating cause for the financial circumstances that contributed to that need. However, in his response to the Commissioner’s motion for summary judgment, Mr. Webert did not anticipate the Commissioner’s arguments (for which we do not blame him), and he therefore did not argue that any of these difficulties fall under the safe harbors enumerated under Treasury Regulation § 1.121-3(b) nor that they were the ‘primary reason’ for the sale of the Mercer Island house in 2015. If we draw all reasonable inferences in Mr. Webert’s favor (as Rule 121 requires), it appears that the health problems may have been the primary reason for the attempts to sell which began in 2009 and did not succeed until 2015.  Consequently, we find a genuine dispute on that factual issue, and we assume that health reasons were the primary reason for the sale. We cannot grant partial summary judgment to the Commissioner on the section 121 exclusion issue if, in order to do so, we must assume otherwise.” T. C. Memo. 2022-32, at pp. 11-12.

The issue is whether Catherine’s health was a “material fact” in the sale.

Of course, even if health was a “material fact” in the sale, all that results is a partial exclusion, and if there was no personal occupancy in any of the five years preceding sale, there is no exclusion.

Clear? Thought not.

Defending the GAAP

Judge Mark V Holmes is back with one of his oldies-but-goodies, Continuing Life Communities Thousand Oaks LLC, Spieker CLC, LLC, Tax Matters Partner, T. C. Memo. 2022-31, filed 4/6/22. And the only reason the Oakies are still around can be found in my blogpost “Titular Signatory,” 8/3/16, when Mr. Spieker signed off on some SOL extenders.

But today I bet he’s glad he did, as Judge Holmes upholds his GAAP tax reporting of various items of future income in this continuing care operation. Those of us on short final for The Big Eight-Oh are often solicited by such operations, especially if the operators think we can stump up a quick half-mil for a floor plan.

“Continuing Life’s business is to provide housing and care to seniors even as their needs change. A new resident might need only housing and food, but as time batters away he may need more. And although Continuing Life is not a hospital, it does promise to provide for its residents’ needs all the way through skilled nursing care. The range of services that it promises costs a lot. And this is reflected in the entry fee—the initial payment that Continuing Life charges to move into the community—and in large monthly payments too. Continuing Life is no outlier—industry surveys show that the entry fees in similar communities average $402,000, with some at over $2 million, and that monthly service fees run between $2,000 and $4,000.” T. C. Memo. 2022-31, at p. 2 (footnote omitted, but it comes from a publication of AARP, of which I am an (un)retired member.)

The issue is not the upfront; that’s held in a unitrust which loans funds to the Oakies at no interest for capital recovery and improvements. It’s not the monthly $2K to $4K, that’s ordinary income, and operating expenses are deductions. It’s the so-called Deferred Fee.

If a resident dies or leaves voluntarily, they get back the upfront when the unit is resold less up to 25% thereof (depending upon how long they stayed). If they’re tossed for cause, they get it all back.

OK, so how do you treat these Deferred Fees? Every one of the residents will leave voluntarily or die, but who knows when?

AICPA, the CPAs’ guru, has the answer. Position 90-8. And no, that’s not an addendum to the Kama Sutra. “We’ll focus only on the provisions that are relevant for this case. The key provisions are those that deal with advance fees. Position 90–8, para. 15 defines an advance fee as a ‘payment required to be made by a resident prior to, or at the time of, admission.’ Some continuing-care communities refund the total amount or a portion of the advance fee on the occurrence of a specified event. These amounts are called the refundable portion, and the remainder is called the nonrefundable portion. The refundable portion is credited as a liability, and the nonrefundable portion is accounted for as deferred revenue. Id. paras. 20–23. For the nonrefundable portion, Position 90–8 again recognized the ‘wide diversity of practice exist[ing] among [continuing-care retirement communities] when accounting for nonrefundable advance fees.’ Id. para. 34. Although there are eight listed methods, only two are relevant here. Paragraph 35 provides that one method recognizes nonrefundable advance fees ‘as revenue in the period the fees are receivable if future periodic fees can reasonably be expected to cover the cost of future services.’ Paragraph 36 provides a second method, which defers recognition of nonrefundable advance fees and amortizes them into income as consideration for providing future services. This method treats the nonrefundable advance fees as future costs that ‘are not recoverable from other revenue sources.’ And, as a result, the matching principle requires that the nonrefundable advance fee be deferred until the expenses arise. The AICPA came down on the side of this latter method….” T. C. Memo. 2022-31, at pp. 11-12 (Footnotes omitted).

Now these operations are strictly regulated, and the Oakies had to use GAAP per CA law. So they straight-line amortized the Deferred Fees over the estimated life of each resident.

IRS says no, in this case GAAP does not clearly reflect Oakies’ income and expenses. The pick-up of Deferred Fees is too slow, and slugged the Oakies with a $20 million tax bill. Everyone agrees the Oakies used GAAP, but IRS says they get to choose what clearly reflects.

Now Section 446(a) says generally (love that word!) it’s gambler’s choice, so what the Oakies used consistently they can keep using. But the exceptions and exceptions to exceptions, and exceptions to exceptions to exceptions, are what keeps us tax lawyers in vodka Gibsons.

There’s enough case law to stock a good-sized law review article, but I’ll spare y’all.

There’s Supremes learning that IRS has more than the usual presumption of correctness when it comes to accounting methods. Ya see, GAAP is for management, investors, lenders, creditors, and certain regulators. IRS is there to guard the fisc, a supercreditor.

“Clearly” means honestly, straightforwardly, plainly, and frankly, but not necessarily perfectly, without fault or flaw. Judge Holmes laments that the case law is jumbled and scrambled, but that’s what we have.

“Yet on the undisputed facts of this case, some of these additional factors also favor Continuing Life: The expenses that Continuing Life incurs because of its continuing-care promise are expenses that it incurs over the entire lifespan of each of its residents, yet it is entitled to the Deferred Fees only when residents depart from the community. We can conclude from this that Continuing Life’s method matches income and expenses better than the accelerated treatment that the Commissioner proposes. We can also conclude from this that Continuing Life’s method, even when viewed on an annual basis, looks like a better match than the Commissioner’s because it recognizes income each year that a resident continues to live in the community and thus impels Community Life to incur expenses on that resident’s behalf.” T. C. Memo. 2022-31, at p. 20.

And the Deferred Fees are not so unique. “Deferred Fees are without doubt material to Continuing Life’s bottom line, but their treatment as an accrued item by a taxpayer following the accrual method doesn’t mark them as out of the ordinary (as it might, for example, for a cash-method taxpayer who uses accrual accounting for a particular item of material expense).” T. C. Memo. 2022-31, at p. 21.

Under the “all-events” test for recognition on the accrual basis, CA law and the Oakies’ operating license requires payment only on death or voluntary vacatur. Until then, the Oakies had to perform the services contracted for. No receipt or recognition by the Oakies until then, so life expectancy is a reasonable yardstick.

And the Oakies couldn’t touch the Deferred Fees until they performed.

IRS has discretion, but the Oakies win.

Perusing the Proposed Tax Court Rules, I find that Rule 27 is indeed amended only stylistically, and that “(No) substantive change is intended.”

Thus, upon adoption, Rule 27(b)(2)(B) will read “( U)nless the Court orders otherwise, access to an electronic file is authorized as follows: (2) any other person may have electronic access at the courthouse to the public record maintained by the Court in electronic form, but may have remote electronic access only to (B) any opinion, order, or decision of the Court, but not any other part of the case file.” (Emphasis added).

I most respectfully suggest that the Rule be further amended to add the headline hereof to the end of said Rule.

Stipulated decisions are sealed; why? Entire dockets are sealed without Court order; why?

Justice must not only be done, it must be seen to be done. Justice concealed is justice denied.

Shawn Stephen Salter, T. C. Memo. 2022-29, filed 4/5/22, got his asserted deductions disallowed when he proffered a 1040 after he got the SNOD. He claimed he’d filed timely, but produced no proof. Since the SNOD came from a SFR, itemized deductions are off the menu. You have to elect to itemize, and you can only elect on a timely-filed return, Section 63(e)(1).

Shawn’s attempt to deduct unreimbursed medicals from the 10% Section 72(t) whatever-it-is (tax? addition?) on his retirement plan drawdown fails, because the amount he sought to exclude was less than 10% AGI, thus hitting the Section 213 cut-off.

IRS magnanimously conceded at trial the late-payment addition, but not the late-filing addition.

I’m sure Shawn was really pleased with the result.

“The notice of deficiency also determined a late-payment addition to tax of $1,527.25—25% of the deficiency—under section 6651(a)(2). By virtue of section 6651(c)(1), the failure-to-file addition to tax shown in that notice was therefore reduced to $1,374.52. Since respondent has conceded the addition to tax for late payment, section 6651(c)(1) does not apply, and the failure-to-file addition to tax will be larger than determined in the notice of deficiency.” T. C. Memo. 2022-29, at p. 6, footnote 2.

Takeaway: If IRS offers to drop late-payment but keep late-filing, reject the offer. Timeo Danaos et dona ferentes. And you don’t need a M. A. in Classics from Clare College, Cambridge, like Judge Scholar Al, to figure that one out.

Allowable living expenses for CDP standards (RCP, CNC, OIC, IA, PPIA) are local. Like politics. And since this is a nonpolitical blog, we’ll stick to the allowable expenses for the locality wherein the taxpayer resides.

Robert J. Norberg and Debra L. Norberg, T. C. Memo. 2022-30, filed 4/5/22, say their circumstances leave them worse off than locally allowable, but have no evidence in support thereof.

Judge Albert G (“Scholar Al”) Lauber won’t disturb Appeals’ NOD.

“We find no abuse of discretion. Although petitioners allege that their cost of living exceeds their income, this allegation appears based on the expenses reported on their Form 433–A, without reference to prevailing local standards. SO2 was authorized to rely on those standards in assessing their ability to pay, and it was their burden to justify a departure from the local standards. See Friedman, 105 T.C.M. (CCH) at 1290. Petitioners have not attempted to meet that burden.” T. C. Memo. 2022-30, at p. 6. Note, SO2 is Settlement Officer 2, the one who rescued the Norbergs’ file from the COVID-locked-down IRS office.

Of course, the Norbergs can always try again for an IA, a PPIA, or an OIC; just bring the substantiation along.

First is the new favorite, the “goofy regulation,” the Perpetuity Rule, Reg. Section .170A-14(g)(6), beloved in 6 Cir but condemned in 11 Cir. And Judge Travis A. (“Tag”) Greaves, the master of fancy footwork, does a Highland Fling in Briarcreek Preserve, LLC, LDHL Investments, LLC, Tax Matters Partner, Docket No. 1547-18, filed 4/4/22.

For those who tuned in late, a major subset of the Perpetuity Rule is improvements-out-at-extinguishment. Judge Tag Graves has a really good explanation, so I’ll let him give it.

“To illustrate, assume a taxpayer donates a conservation easement worth $30 on unimproved property with an unencumbered value of $100. The judicial extinguishment regulation mandates that the donee receive at least 30% of total sale proceeds ($30 ÷ $100 = 0.3). Assume further that the taxpayer later adds improvements worth $50, and sells the property for $150 following judicial extinguishment of the easement. Briarcreek’s deed would allocate the donee $30, which is 30% of $100, the difference between the $150 of sale proceeds and the $50 value of the improvements. But $30 is only 20% of the $150 total sale proceeds. The regulation requires that the donee receive at least 30% of $150, or $45.” Order, at p. 5.

Now before you give me the Matthew 25:24 sobstory, the tax break isn’t free; Congress had a purpose, the preservation of that which without its intervention via IRC would be lost. It wasn’t to give the beneficiary of the tax break the deal they wished they had. And the donor can always not make any improvements: forever wild, right?

The Briarcreeks had an improvements-out deal on their Burke County, GA scrub. They want summary J that the Perpetuity Rule, a/k/a the “Goofy Regulation,” is out, per Hewitt, and they’re Golsenized to 11 Cir, so that should be a slam-dunk.

But Judge Tag Greaves is dancing.

“Although the Golsen rule prevents this Court from denying petitioner’s deduction on this ground, we will hold petitioner’s motion in abeyance pending further appellate developments on the validity of Treasury Regulation § 1.170A-14(g)(6). Cf. Montgomery-Ala. River, LLC v. Commissioner, T.C. Dkt. No. 9254-19 (Feb. 25, 2022) (order taking a similar approach).” Order, at p. 5.

See my blogpost “And Quiet Flows the Silt,” 2/25/22 for the Montgomery story.

But the Briarcreeks aren’t through; it’s open season on the conservation easement regulations. Now they’re attacking the spill-your-basis regulation, Reg. Section 170A-13(c). They don’t know what basis to use, and cite to the wrong part of the instructions for Form 8283. They say the statute requires the disclosure in the return, but IRS has it in the Form 8283. But a “return” includes all schedules and attachments required. And the statute (the Deficit Reduction Act of 1984 (DEFRA)) is broad enough to encompass whatever IRS did.

Of course, the Briarcreeks claim reasonable reliance, but that’s a fact question, so IRS doesn’t get summary J.

Summary J to IRS sustaining the spill-your-basis regulation but keeping reasonable reliance open for trial; and on summary J to IRS on the Perpetuity Rule, held in abeyance pending “further appellate developments.” Taishoff translation “pending what the Supremes do with this.”

Next goofy development. STJ Peter Panuthos shows remarkable sang froid in dealing with the good-faith reliance argument of Suzanne M. Scholz, T. C. Sum. Op. 2022-5, filed 4/4/22.

“Although petitioner hired H&R Block to prepare her tax return, the Court is not convinced that she provided necessary and accurate information to her return preparer and that she actually relied in good faith on the return preparer’s judgment. Petitioner failed to keep adequate records of her reported business expenses and charitable contributions. Furthermore, she testified at trial that she included certain expenses on her tax return against the advice of her paid tax preparer.” T. C. Sum. Op. 2022-5, at p. 14.

Ms. Scholz was self-represented. So no counsel was present to follow the advice of the late great Henry G. Miller, Esq., to smile the sweetest smile, as if that testimony was exactly what one wanted to hear, then walk out into the hallway and sob.