In Uncategorized on 05/12/2022 at 16:27

Michael J. Rogerson, T. C. Memo. 2022-49, filed 5/12/22 (a date of much more significance to me than this case), is the sort of client I’d love to have. Mike is a total micromanager of the multi-million-dollar aerospace conglomerate he built from a summer job.

Judge Emin (“Eminent”) Toro tells Mike’s story. “Mr. Rogerson was a hands-on CEO during the years at issue. No major decisions could be made without his input, and no detail was too small for his attention. For example, Mr. Rogerson weighed in on accounting and financial reporting minutiae, interacted directly with company employees, and line-edited company documents, such as offer letters and press releases. Top… executives reached out to him for permission to undertake routine actions, such as responding to customer inquiries or providing small bonuses or raises to company employees.  On one occasion, [Mike’s Sub S]’s president sought approval from Mr. Rogerson to offer an employee a raise of $0.50 per hour. On other occasions,  executives confirmed that Mr. Rogerson’s direct involvement, whether in the form of ‘ongoing and specific directives,’ ‘edict[s],’ or other directions, would be required to get things done.

“Mr. Rogerson’s involvement in sales and customer relations further belies any assertion that he was not substantially involved in [Sub S]’s operations. Mr. Rogerson traveled to meet with [Sub S’]  customers, including on one occasion to Indonesia. He also met with [Sub S] customers at [Sub S]’s offices. Indeed, the record reflects more than one instance in which Mr. Rogerson told … executives that he would resolve a problem by meeting personally with the customer involved. Customers sometimes reached out to Mr. Rogerson directly to discuss issues, and Mr. Rogerson was involved in multiround negotiations with customers on pricing and other matters. He also approved any bid provided to a customer with an aggregate value over $100,000; in one month in [one year at issue], that approval was requested at least a dozen times.”

“In the face of a record demonstrating that he spoke and emailed with executives regularly on [Sub S] matters, Mr. Rogerson asserts that most of these interactions took only minutes of his time. Even assuming that to be the case, however, Mr. Rogerson’s ability to respond to detailed inquiries so quickly shows his detailed knowledge of every aspect of the business. Indeed, many of Mr. Rogerson’s communications reflect first-hand experience with [Sub S]’s employees, customers, and products that extends far beyond what could have been acquired by a passive investor.” T. C. Memo. 2022-49, at p. 26.

And in spite of Mike’s APA attack on Reg. Section 1.469-5T, issued without notice and comment, and still not permanent, Section 469(h) itself says that to be active, participation must be “regular, continuous, and substantial.” Mike’s sure is.

Mike’s would-be writeoff of his two (count ’em, two) megayachts fails for want of any rental activity. But they sure sound like beauties.

Mike’s reliance on his trusty preparer saves the chops.

Going back to my opener, years ago I had a client who took me to look at one of his buildings. I wore my three-piece, he wore torn bluejeans and a dirty teeshirt. As we walked into the building, he greeted every tenant by name. He crawled under a 550-gallon oil tank to look for leaks because the oil bill was too high. Then he decided the problem was in the heating controls, so he took a screwdriver from the superintendent and rewired and recalibrated them while the system was still “hot.” Then we drove off in his ten-year-old econobox.

Did  mention he dropped out of Columbia Law School after his first year because “Why should I waste my time on that nonsense when I can hire you?”

He and Mike would have gotten on a treat.


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