James H. (“JIm”) Kim, T. C. Memo. 2023-91, filed 7/20/23, claims he shouldn’t be taxed on his long-term capital gains from now-closed pre-COVID years, because he got slaughtered on his cryptocurrency dealings in 2020, which slaughterings he can’t carryback.

Judge Albert G. (“Scholar Al”) Lauber suggests that, even if Jim Kim’s claims that the guv’mint is a den of iniquity, his claims are but the din of inequity, or, as an authority even more exalted than Judge Scholar Al put it, “a resounding gong or a clanging cymbal.”

“Petitioner does not dispute the amount or character of the net capital gains determined in the notice of deficiency for [closed years]. But he contends that the virtual currency assets that gave rise to these gains ‘were completely wiped out’ in 2020, during the early days of the COVID epidemic. He represents that he had taken out a large loan to finance his cryptocurrency transactions; that BTC and other virtual currencies declined precipitously in a single day; that he was unable to meet a margin call; and that his virtual currency positions were liquidated at a very substantial loss. He asserts that the actions (or inaction) of the U.S. Government in response to the COVID epidemic ‘directly caused [that] harm’” and that, “under the Clean Hands doctrine of US law,’ the IRS should be estopped from collecting tax on his [closed years] gains.” T. C. Memo. 2023-91, at p. 4.

Sorry, Jim Kim, “Petitioner’s argument has no legal basis. The doctrine of estoppel can be invoked against the United States only in the rarest of circumstances. In any event, the ‘unclean hands’ principle is designed to withhold equitable relief from one who has acted improperly. Respondent is not seeking equitable relief but is endeavoring to recover taxes determined to be due from petitioner under the Internal Revenue Code. And while petitioner may disagree with the Government’s policy response to the COVID epidemic, he has not shown that any agency of the Government (much less the IRS) acted improperly.

“When relevant, the ‘unclean hands’ defense applies only to conduct immediately related to the cause in controversy. The Government’s actions in response to the COVID epidemic have no relationship whatever to the determination of petitioner’s [closed years] tax liabilities.” T. C. Memo. 2023-91, at p. 5. (Citations omitted).

Besides, every year stands on its own.

“‘A fundamental tenet of the Federal income tax is the “annual accounting principle.”‘ This principle dictates that a taxpayer’s income for a particular year be calculated on the basis of the events occurring during that year. Congress has mitigated this principle to some degree by allowing the carryback and carryforward of certain losses and credits. But while corporations generally may carry capital losses both forward and back, § 1212(a)(1), Congress has been less generous in the case of individual taxpayers. For them, the excess of capital losses over capital gains recognized for any year may be carried only to ‘the succeeding taxable year.’ § 1212(b)(1). Any capital losses petitioner realized in 2020 are thus irrelevant in determining his tax liabilities for [closed years].” T. C. Memo. 2023-91, at p. 5. (Citation omitted).