And the new item is inventory, an addition to IRS’ avoid-trial-at-any-price contestable readings of Section 170, specifically Section 170(e). Judge Christian N. (“Speedy”) Weiler brushed off IRS’ attempt to add this to IRS’ attack on Jackson Crossroads LLC, Greencone Investments LLC, Tax Matters Partner, et. al., Docket No. 12235-20, filed 3/6/24. But IRS wants Rule 161 Reconsideration, based on “Rock Cliff Reserve, LLC et. al. v. Commissioner (Docket No. 12472-20) and Order dated November 15, 2022, in Oconee Landing Property, LLC et. al. v. Commissioner (Docket No. 11814-19).” Order, at p. 2, footnote 2.

The brushoff in question took place back on 1/19/24, a special date in our family. For the brushoff, see my blogpost “When Fact Met Law,” 1/19/24.

Now reconsideration in light of other Tax Court orders is a bit novel.

“Unlike motions for reconsideration of findings of fact and opinions, there is no specific rule governing the standards with respect to motions for reconsideration of Orders of this Court. See Rules 161 and 162, of the Tax Court Rules of Practice and Procedure. Under Rule 161, reconsideration is intended to correct substantial error, either of fact or law, and facilitates the introduction of new evidence the moving party could not have previously introduced with due diligence. However, reconsideration is not the appropriate forum for rehashing previously rejected legal arguments or for tendering new legal theories to reach the end result desired by the moving party. Deciding whether to grant a motion for reconsideration lies within the discretion of the Court.” Order, at p. 2 (Citations omitted).

Here, the FPAA, which the Jacksons claim never raised inventory, raised a general “you didn’t comply with Section 170 and the Regs” which IRS claims puts in play treatment of “property held for sale in ordinary course.”

Judge Speedy Weiler buys it.

“Although these orders are not formal precedential decisions or reports of this Court; we are inclined to reconsider the issue on brief. Furthermore, after hearing the evidence in this case, we find there is no unfair surprise or prejudice to consider the Inventory Issue on brief. Furthermore, petitioner remains free to argue, on brief, that respondent has failed to properly plead the Inventory Issue or that the issue has no application in this case.” Order, at p. 3.

For Rock Cliff, see my blogpost “Broad Spectrum,” 9/13/23. I blogged the quoted Oconee order for Judge Albert G. (“Scholar Al”) Lauber’s take on expert witness testimony, not the inventory bit.

Takeaway- All the evidence about attempted subdivisions and sales of houses, with co-ventures with developers, to show before HBU, is a double-edged sword; was the land held for development and sale rather than for investment? Inventory? Fact question, but tricky.