Econfina Resources, LLC, Econfina Corporation, Tax Matters Partner, Docket No. 12980-22, filed 2/14/24, playing the Dixieland Boondockery gambit, Mining variation, escapes getting entangled in the hand-off from syndicator to syndicatees.

The usual deal is that syndicator sets up an LLC to buy the land, sells off membership interests in the LLC, records the conservation easement, and hands out the tax deductions to the members. The members claim a tack-on of the syndicator’s holding period. IRS counters with Situation 1 of Revenue Ruling 99-5, 1999-1 C.B. 427, 434–35, claiming the syndicator was a single-member LLC when the land was acquired, hence disregarded, so the transfer of membership interests was a sale of the real estate.

Judge Elizabeth Crewson Paris has this on a motion for partial summary J (what else?). So here the seller claims it laid off its  1% membership interest in a Section 351 to a controlled C Corp before it sold the remaining 99% to the syndicator. The  syndicator’s trusty attorneys carefully papered the deal. “At the least, these documents raise a factual dispute as to the order of the transactions.”  Order, at p. 5.

IRS’ fallback, substance over form, gets the usual “(T)he application of the substance over form doctrine is inherently factual and generally not appropriate for summary judgment.” Order, at p. 5.

The trusty attorneys, whose leader I’ll call The Birmingham Baron, get a Taishoff “Good Job.”

Edited to add: Step transaction, maybe so?